How to Select the Best Mutual Funds in India?

13 June, 2024

Synopsis

• Model portfolios are predefined investment strategies created by financial experts or institutions to meet specific financial objectives and risk profiles of investors.

• These portfolios typically consist of a mix of mutual funds, ETFs, or individual securities tailored to suit various investment objectives such as growth, income, or balanced portfolios.

• Investors can select a model portfolio that matches their investment objectives and risk profile, to easily diversify their investments effectively.

• HDFC Bank SmartWealth App offers model portfolios as one of its key features to assist investors in mutual fund selection.
  
  

On a pleasant Friday evening, friends Riya and Kabir decided to catch up over dinner at their favourite restaurant.

Kabir was a few months into his first job and was keen to start investing in mutual funds. However, like most first-timers, one question haunted him: How to choose mutual funds from the thousands of schemes? During the dinner Kabir decides to seek help from Riya, who is a finance professional.

Kabir: Riya, I want to start investing in mutual funds, but I need to understand how to pick mutual funds to meet my financial objectives.

Riya: That's fantastic, Kabir! It's a smart move to start with mutual funds at the beginning of your career. Let's break down the process of selecting a good mutual fund scheme.

The first step is to answer two simple questions - what is the purpose of investing, and in how much time would you like to realise that purpose?

Kabir: Hmm. As a beginner, I’m looking for long-term wealth creation over the next 20 to 30 years.

Riya: It’s good that you have clarity on the objective. Since the objective is wealth creation, equity mutual funds would be suitable for that timeframe as they help you maximise returns. Based on your risk profile, you can choose from large cap, multi cap and mid cap funds.

Kabir: But, I have heard that equity mutual funds are risky! I would prefer a balanced approach, and would avoid high-risk investments. Any suggestions?

Riya: In that case, I suggest you start using HDFC Bank SmartWealth App, which can help you select suitable mutual fund schemes that are aligned with your risk tolerance and purpose of investing. Here is what HDFC Bank SmartWealth App offers you: 

• Investment Profile suggests suitable fund categories based on your risk appetite.

• Fund Screener allows filtering on multiple parameters like returns, rating and AUM.

• Fund Report Card provides key metrics like performance, expenses and fund managers.

• 'Recommended' funds endorsed by the research team can be considered.

• Portfolio Analyser helps evaluate diversification across sectors and market caps.

Kabir: Great. This means the SmartWealth app is the right tool for hassle-free fund selection for first-time investors like me!

Riya: Absolutely! Using the SmartWealth app, you can easily compare shortlisted funds on parameters like:

• Returns 

• Ratings 

• AUM

• Expenses 

• Fund manager's experience

This enables you to make data-driven decisions for picking up mutual funds.

Here is how you can select mutual funds with HDFC Bank SmartWealth app:

Once you log in, just go to the 'Discover' section. Here, you'll see a bunch of mini tiles for different investment types, like 

• Model Portfolio
• Tax-Saver Funds
• Top Rated Funds
• Start with ₹100
• Debt Funds
• Equity Funds
• Hybrid Funds

For example, go to the 'Hybrid Funds' tile if you want to invest in balanced funds. You'll see a list of all funds divided into 'Recommended' and 'Other' sections.

The recommended ones are funds that match your investment profile and risk tolerance.

You can also filter by market cap. Pick a fund you that like from the recommended ones.

Before investing, the app will check if the fund suits your profile. If not, it'll suggest you to add a more suitable fund instead. 

So, the app helps you throughout the process of picking the right funds!

Kabir: That makes sense! Thank you, Riya, for simplifying the process to choose mutual funds. I am more confident now in selecting suitable mutual funds through the SmartWealth app.

Riya: You’re most welcome! Feel free to reach out if you need any help while starting your investment journey.

Kabir was glad he asked Riya for input.

Over the next few days, Kabir thoroughly evaluated various mutual fund schemes on the SmartWealth app.

Based on several parameters such as returns, ratings, AUM, expenses and portfolio holdings analysis, Kabir shortlisted good mutual funds to start his investment journey.

The Investment Profile feature marked his risk tolerance as 'Moderate'. He was happy to see schemes aligned well with his risk appetite. 

You can also make your mutual fund selection process simple by using the HDFC Bank SmartWealth App.

If you are a beginner like Kabir, you might have a few questions in mind. Here are answers to some of the most commonly asked questions about choosing a mutual fund. 

FAQs

How to select a mutual fund scheme?

Start with defining your investment purpose and time horizon. Next, assess your risk tolerance. Based on these two factors, shortlist suitable fund categories like equity, debt or hybrid. Analyse and compare specific schemes on long-term returns, fund management experience, portfolio holdings and expense ratio to name a few, and start your investment.

How many mutual fund schemes should I invest in?

As a beginner, you can start with 2-3 top-performing mutual fund schemes from different fund houses for diversification. Avoid investing in too many schemes as it will lead to an overlap and cause overdiversification.

Which app helps pick the best mutual funds?

The HDFC Bank SmartWealth App makes picking suitable mutual funds easy for new investors. Its key features like Investment Profile, Fund Screener, Fund Report Card, Research Team Recommendations and Portfolio Analyser, enable you to shortlist and compare funds effortlessly.

Disclaimer: This communication has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. HDFC Bank Limited ("HDFC Bank") does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. HDFC Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document. HDFC Bank may at any time solicit or provide commercial banking, credit or other services to the Mutual Funds / AMCs referred to herein.

Accordingly, information may be available to HDFC Bank, which is not reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication. HDFC Bank neither guarantees nor makes any representations or warranties, express or implied, with respect to the fairness, correctness, accuracy, adequacy, reasonableness, viability for any particular purpose or completeness of the information and views. Further, HDFC Bank disclaims all liability in relation to use of data or information used in this report which is sourced from third parties.

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