Exploring the Different Categories on Mutual Funds to Invest In

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They exist to provide individuals with a convenient and professionally managed way to invest in financial markets. Many different types of mutual funds are available to provide investment options that fit the investment preferences of a large audience. This makes mutual funds one of the most versatile and flexible financial instruments. Let us better understand all the different types of mutual funds so that you can make investment decisions that are suited to your goals.

Types of Mutual Funds in the Market

Following are the various different types of mutual funds largely available in the Indian market:

1. Large Cap Funds

Large cap funds invest in companies with a large market capitalization. These companies are typically well-established and are considered relatively stable compared to smaller companies. Large cap funds aim for steady growth and are often suitable for conservative investors looking for stability in their portfolio.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
HDFC Top 100 Fund
20.7%
18.7%
14.6%
25,775
UTI Mastershare Unit
19.8%
18.3%
13.9%
11,507
ICICI Prudential Bluechip Fund
23.4%
22.0%
17.3%
40,286
SBI Bluechip Fund
18.9%
17.1%
13.3%
27,898
Aditya Birla Sun Life Frontline Equity Fund
20.1%
18.2%
14.1%
19,563
Tata Large Cap Fund
19.4%
17.5%
13.7%
22,806
Axis Large Cap Fund
20.9%
18.9%
14.8%
18,427

2. Mid Cap Funds

Mid cap funds invest in companies with a medium market capitalization. These companies have more growth potential than large cap companies but come with a higher level of risk. Mid cap funds are suitable for investors with a moderate risk appetite who are looking for a balance between stability and growth.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
Motilal Oswal Midcap Fund
24.60%
20.10%
15.50%
13,689
HDFC Mid-Cap Opportunities Fund
35.20%
24.40%
17.20%
7,872
Nippon India Growth Fund
20.50%
17.90%
14.20%
12,634
SBI Magnum Midcap Fund
23.30%
19.40%
15.20%
9,484
Mahindra Manulife Mid Cap Fund
22.50%
18.80%
14.90%
6,962
Edelweiss Mid Cap Fund
24.80%
20.90%
16.30%
6,277
Kotak Emerging Equity Fund
25.90%
21.80%
16.80%
5,872
Tata Midcap Growth Fund
21.90%
18.80%
14.90%
7,791

3. Small Cap Funds

Small cap funds invest in companies with a small market capitalization. These companies have the highest growth potential among the three categories but also carry the highest risk. Small cap funds are suitable for investors who are willing to take on a higher level of risk in exchange for the possibility of substantial returns.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
HDFC Small Cap Fund
39.75%
18.98%
12.26%
22,496
Franklin India Smaller Companies Fund
32.25%
16.03%
9.74%
10,678
Nippon India Small Cap Fund
31.13%
15.17%
9.27%
9,998
Tata Small Cap Fund
33.50%
16.79%
10.24%
9,366
HSBC Small Cap Fund
31.19%
15.24%
9.41%
6,981
Sundaram Small Cap Fund
30.61%
14.87%
9.15%
7,594
Axis Small Cap Fund
30.59%
14.84%
9.11%
6,787

4. Flexi Cap or Multi Cap Funds

Flexi cap funds, also known as multi cap funds, have the flexibility to invest across different market capitalizations based on market conditions. Fund managers can allocate assets to large, mid, or small cap stocks depending on their analysis of market trends. Flexi cap funds offer a balanced approach by leveraging opportunities across the spectrum of company sizes.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
HDFC Flexi Cap Fund
21.28%
18.85%
15.62%
14,656
SBI Flexi Cap Fund
21.25%
18.79%
15.61%
14,114
Canara Robeco Flexi Cap Fund
20.98%
18.52%
15.40%
9,401
UTI Flexi Cap Fund
21.11%
18.65%
15.52%
14,999
Aditya Birla Sun Life Flexi Cap Fund
20.69%
18.28%
15.23%
8,737
Kotak Flexi Cap Fund
21.65%
19.14%
15.79%
9,869
Motilal Oswal Flexi Cap Fund
21.13%
18.67%
15.53%
11,053

5. Debt Funds

Debt funds invest in fixed-income securities like government and corporate bonds. These funds are considered less risky compared to equity funds and are suitable for investors who prioritise capital preservation and generate regular income.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
SBI Ultra Short Term Fund
5.26%
5.63%
6.33%
2,41,093
Aditya Birla Sun Life Money Market Fund
5.18%
5.55%
6.25%
2,94,952
HDFC Liquid Fund
5.24%
5.61%
6.31%
2,30,847
ICICI Prudential Liquid Fund
5.17%
5.54%
6.24%
1,62,812
Kotak Liquid Fund
5.21%
5.58%
6.28%
1,48,825

6. Hybrid Funds

Hybrid funds, also known as balanced funds, invest in a mix of both equities and fixed-income instruments. They offer a diversified portfolio within a single fund and are suitable for investors seeking a balanced approach between risk and returns.

Fund Name 3-Year Returns 5-Year Returns 10-Year Returns AUM (in crores)
HDFC Balanced Advantage Fund
15.04%
13.21%
11.02%
1,26,157
Mahindra Manulife Aggressive Hybrid Fund
23.06%
19.82%
15.78%
85,225
Kotak Equity Hybrid Fund
22.53%
19.39%
15.52%
90,939
Edelweiss Aggressive Hybrid Fund
22.41%
19.27%
15.45%
69,110
Aditya Birla Sun Life Dynamic Equity Fund
21.42%
18.43%
14.78%
92,392
ICICI Prudential Balanced Advantage Fund
19.39%
16.81%
13.66%
1,59,542
Birla Sun Life Focused Equity Fund
22.10%
18.99%
15.25%
72,542
Tata Balanced Fund
21.07%
17.99%
14.34%
95,391

How to Choose the Right Mutual Fund?

Choosing the right mutual fund requires careful analysis and consideration of various factors:

  1. Investment Goals: Clearly define your investment goals. Are you looking for capital appreciation, regular income, or a combination of both? Your goals will help determine the type of mutual fund that aligns with your objectives.
  2. Risk Tolerance: Assess your risk tolerance. Different categories of mutual funds carry varying levels of risk. Consider your comfort level with market fluctuations and potential losses.
  3. Performance History: Evaluate the historical performance of the mutual fund over different market cycles. Look for consistent performance and how the fund has performed compared to its benchmark index.
  4. Expense Ratio: The expense ratio is the annual fee charged by the fund to cover operating expenses. Lower expense ratios can have a positive impact on your returns over time.
  5. Fund Manager Expertise: Research the fund manager’s track record and experience. An experienced and skilled fund manager can play a crucial role in the fund’s success.
  6. Portfolio Holdings: Review the fund’s portfolio holdings to understand the types of securities it invests in. Ensure that the portfolio aligns with your investment goals and risk tolerance.
  7. Exit Load and Taxes: Consider any exit loads (fees for withdrawing early) associated with the fund. Additionally, understand the tax implications of investing in mutual funds.

Conclusion

Mutual funds offer a versatile landscape for investors, spanning diverse categories that suit various goals and risk levels. From stability to growth and balance, each category has unique attributes. Evaluating your objectives, risk tolerance, performance history, costs, and management expertise is key. As you delve into large, mid, small, flexi cap, debt, and hybrid funds, harness this knowledge to guide your investment choices. Mutual funds are more than figures; they’re pathways to aligning aspirations with market potential. Armed with this insight, confidently embark on your investment journey and work toward your financial aspirations.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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