Last Updated on Jul 30, 2024 by Anjali Chourasiya
Everyone knows the benefits of mutual funds, but finding the right one from thousands of funds can be an overwhelming task, especially for beginners. Here in this article, we’ve listed the best mutual funds for beginners according to the different categories – equity, debt and hybrid.
Table of Contents
Best mutual funds for beginners (2024)
Based on three different categories, we’ve listed the best mutual funds for each. The lists are derived using Tickertape’s Mutual Fund Screener.
Best equity mutual fund for beginners
| Name | Sub-Category | AUM (Rs. in cr.) | 5Y CAGR (%) | 3Y CAGR (%) | Expense Ratio (%) | Volatility (%) | Minimum Lumpsum (Rs.) |
| Quant Small Cap Fund | Small Cap Fund | 8,075.14 | 30.94 | 47.73 | 0.77 | 14.69 | 5,000.00 |
| Quant Infrastructure Fund | Sectoral Fund – Infrastructure | 930.50 | 28.01 | 44.59 | 0.77 | 15.53 | 5,000.00 |
| SBI Tax Advantage Fund-III | Equity Linked Savings Scheme (ELSS) | 31.69 | 27.18 | 30.09 | 0.00 | 8.62 | Not allowed |
| Quant Tax Plan | Equity Linked Savings Scheme (ELSS) | 4,433.80 | 26.82 | 36.58 | 0.76 | 13.29 | 500.00 |
| Nippon India Small Cap Fund | Small Cap Fund | 36,539.55 | 26.64 | 44.17 | 0.72 | 11.16 | Not allowed |
| Axis Small Cap Fund | Small Cap Fund | 15,847.24 | 26.45 | 34.73 | 0.55 | 9.05 | 100.00 |
| Quant Mid Cap Fund | Mid Cap Fund | 2,531.32 | 26.31 | 40.55 | 0.76 | 14.47 | 5,000.00 |
| ICICI Pru Smallcap Fund | Small Cap Fund | 6,510.80 | 26.00 | 39.50 | 0.70 | 9.69 | 5,000.00 |
| Kotak Small Cap Fund | Small Cap Fund | 12,285.82 | 25.57 | 37.49 | 0.43 | 8.64 | 100.00 |
| SBI LT Advantage Fund-IV | Equity Linked Savings Scheme (ELSS) | 186.54 | 25.54 | 35.12 | 0.00 | 8.81 | Not allowed |
Note: The information is dated 7th February 2024. The parameters used to filter the top 10 equity mutual funds in India for 2024 for beginners on the Tickertape Mutual Fund Screener are mentioned below.
- Category > Equity
- Plan: Growth
- 5-yr CAGR: Set from highest to lowest
Best debt mutual funds for beginners
| Name | Sub-Category | AUM (Rs. in cr.) | 5Y CAGR (%) | 3Y CAGR (%) | Expense Ratio (%) | Volatility (%) | Minimum Lumpsum (Rs.) |
| Nippon India Nivesh Lakshya Fund | Long Duration Fund | 6,348.08 | 9.23 | 4.67 | 0.30 | 3.78 | 5,000.00 |
| Aditya Birla SL Medium Term Plan | Medium Duration Fund | 1,890.60 | 9.02 | 13.56 | 0.87 | 1.02 | 1,000.00 |
| DSP G-Sec Fund | Gilt – Short & Mid Term Fund | 592.28 | 8.85 | 5.13 | 0.54 | 1.67 | 100.00 |
| SBI Magnum Gilt Fund | Gilt – Short & Mid Term Fund | 7,195.93 | 8.84 | 5.84 | 0.46 | 1.88 | 5,000.00 |
| Bandhan G-Sec-Invest | Gilt – Short & Mid Term Fund | 1,453.46 | 8.75 | 4.52 | 0.62 | 1.92 | 1,000.00 |
| ICICI Pru Constant Maturity Gilt Fund | Gilt – Long Term Fund | 2,195.83 | 8.67 | 4.37 | 0.23 | 2.93 | 5,000.00 |
| Kotak Gilt Fund | Gilt – Short & Mid Term Fund | 2,387.71 | 8.67 | 5.68 | 0.42 | 1.62 | 100.00 |
| Kotak Gilt Fund-PF&Trust | Gilt – Short & Mid Term Fund | 2,387.71 | 8.67 | 5.68 | 0.42 | 1.62 | 100.00 |
| Edelweiss Government Securities Fund | Gilt – Short & Mid Term Fund | 137.62 | 8.65 | 5.62 | 0.49 | 2.08 | 5,000.00 |
| Bandhan G-Sec-Constant Maturity Plan | Gilt – Long Term Fund | 302.98 | 8.62 | 3.87 | 0.29 | 2.94 | 1,000.00 |
Note: The information is dated 7th February 2024. Below are the parameters used to filter the top 10 debt mutual funds in India for 2024 for beginners on the Tickertape Mutual Fund Screener.
- Category > Debt
- Plan: Growth
- 5-yr CAGR: Set from highest to lowest
Best hybrid mutual funds for beginners
| Name | Sub-Category | AUM (Rs. in cr.) | 5Y CAGR (%) | 3Y CAGR (%) | Expense Ratio (%) | Volatility (%) | Minimum Lumpsum (Rs.) |
| Quant Multi Asset Fund | Multi Asset Allocation Fund | 936.86 | 23.24 | 29.21 | 0.67 | 9.39 | 5,000.00 |
| Quant Absolute Fund | Aggressive Hybrid Fund | 1,335.08 | 21.56 | 28.14 | 0.75 | 10.33 | 5,000.00 |
| Bank of India Mid & Small Cap Equity & Debt Fund | Aggressive Hybrid Fund | 462.92 | 18.69 | 28.15 | 1.55 | 9.38 | 5,000.00 |
| ICICI Pru Equity & Debt Fund | Aggressive Hybrid Fund | 24,990.09 | 17.93 | 31.58 | 1.12 | 6.99 | 5,000.00 |
| ICICI Pru Multi-Asset Fund | Multi Asset Allocation Fund | 21,705.11 | 17.27 | 29.80 | 1.01 | 5.91 | 5,000.00 |
| HDFC Balanced Advantage Fund | Balanced Advantage Fund | 60,640.94 | 16.76 | 30.84 | 0.84 | 7.02 | 100.00 |
| Kotak Equity Hybrid Fund | Aggressive Hybrid Fund | 4,049.59 | 16.54 | 23.25 | 0.47 | 6.47 | 100.00 |
| Baroda BNP Paribas Aggressive Hybrid Fund | Aggressive Hybrid Fund | 863.30 | 16.07 | 20.30 | 0.60 | 7.61 | 5,000.00 |
| Edelweiss Aggressive Hybrid Fund | Aggressive Hybrid Fund | 822.90 | 15.86 | 24.50 | 0.57 | 7.18 | 5,000.00 |
| DSP Equity & Bond Fund | Aggressive Hybrid Fund | 8,121.32 | 15.17 | 19.85 | 0.79 | 7.23 | 100.00 |
Note: The information is dated 7th February 2024. Below are the parameters used to filter the top 10 hybrid mutual funds in India for 2024 for beginners on the Tickertape Mutual Fund Screener.
- Category > Hybrid
- Plan: Growth
- 5-yr CAGR: Set from highest to lowest.
How to invest in mutual funds in India for beginners?
You can make a lump sum investment in mutual funds or choose SIP for periodic investments. Once you’ve decided the way you want to invest and the fund, you can invest as per the ways below:
- Online or offline from the mutual fund house directly
- Through your broker
- Through AMFI registered agents
You can use Tickertape Mutual Fund Screener to find the best mutual funds in India. You can filter the funds based on your preferred parameters like AUM, NAV, 1-yr returns and more. You can also download the list of funds filtered as per your preferred parameters.
The best part is you can watchlist your favourite funds to monitor them regularly. Click to learn more about how to use Tickertape Mutual Fund Screener.    Â
Taxation on Mutual Funds as per the 2024 Budget
Tax on Equity Mutual Funds
Short-Term Capital Gains (STCG)
If you hold equity mutual funds for less than a year, the gains from these investments are classified as short-term capital gains. According to the new budget, these gains are now taxed at a rate of 20%, which has been increased from the previous rate of 15%.
Long-Term Capital Gains (LTCG)
For equity mutual funds held for more than a year, the gains are considered long-term capital gains. The key points to note under the new budget are:
- Tax-Free Limit: Gains up to Rs. 1.25 lakh in a financial year remain tax-free. This limit has been increased from the previous threshold of Rs. 1 lakh.
- Tax Rate: Any gains above Rs. 1.25 lakh are taxed at a flat rate of 12.5%. It was previously taxed at 10%.
- Indexation: It’s important to note that the benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation is a method used to adjust the purchase price of an asset (like property or gold) for inflation over the years. This adjusted price is then used to calculate capital gains. Previously, long-term capital gains from selling property, gold, or other unlisted assets were taxed at 20%, but you could use indexation to reduce your taxable profit. The new rule simplifies the tax structure by setting a flat 12.5% tax rate for all long-term capital gains. However, it removes the indexation benefit.
Summary
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
Tax on Debt Funds
Short-Term Capital Gains (STCG)
If you sell your debt fund units within three years (36 months), the gains from these investments are considered short-term capital gains. According to the new budget, these gains will be taxed according to your income tax slab rate.
Long-Term Capital Gains (LTCG)
For debt funds held for over three years (36 months), the gains are categorized as long-term capital gains. The key points to note under the new budget are:
- Tax Rate: The tax rate for long-term capital gains on debt funds is now a flat 12.5%, regardless of the amount of gain.
- No Indexation Benefit
Summary
| Capital Gains Tax | Description |
| Short-Term Capital Gains (STCG) | If you sell your debt fund units within three years (36 months), the tax will be as per your income tax slab. |
| Long-Term Capital Gains (LTCG) | For debt funds held for over three years (36 months), the tax rate is now a flat 12.5% without indexation benefits. |
Tax on Hybrid Funds
Short-Term Capital Gains (STCG)
For hybrid mutual funds, the tax treatment of short-term capital gains depends on the asset allocation of the fund:
- Equity-Oriented Hybrid Funds (more than 65% in equity): If you sell units within one year, the gains are considered short-term and taxed at 20%.
- Debt-Oriented Hybrid Funds (less than 65% in equity): If you sell units within three years, the gains are considered short-term and taxed according to your income tax slab.
Long-Term Capital Gains (LTCG)
For hybrid mutual funds held beyond the specified holding periods, the tax treatment is as follows:
- Equity-Oriented Hybrid Funds (more than 65% in equity): Gains from units held for more than one year are considered long-term. These gains are taxed at a flat rate of 12.5%, with gains up to Rs. 1.25 lakh being tax-free.
- Debt-Oriented Hybrid Funds (less than 65% in equity): Gains from units held for more than three years are considered long-term and are now taxed at a flat rate of 12.5% without indexation benefits.
Summary
| Type of Fund | Short-Term Capital Gains (STCG) | Long-Term Capital Gains (LTCG) | Indexation Benefit |
| Equity-Oriented Hybrid Funds | 20% for holdings less than 1 year | 12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free | Not available |
| Debt-Oriented Hybrid Funds | Taxed as per income tax slab for holdings less than 3 years | 12.5% for holdings over 3 years | Not available |
Why should you invest in mutual funds?
Mutual funds are managed by fund managers who invest your money into different asset classes for profits. The reasons you need to invest in mutual funds are below:
- Start little: Mutual funds provide an opportunity to invest with less investment, starting at Rs. 100 at regular intervals. This can even establish a disciplined approach in you.
- Diversified: As the investment is made in different instruments, the investment is diversified. Hence, even if one asset doesn’t perform well, there can be other options in the fund to compensate for the loss.
- Quick and simple: You can invest in mutual funds online quickly with simple steps.
Important factors to know while investing in mutual funds
Though mutual funds can provide good returns with a diversified option, there are certain factors you need to consider before investing.
- There are several mutual funds available that are categorised based on their portfolio composition and risk. You need to pick the right mutual fund according to your investment goal and risk tolerance.
- While investing in mutual funds, keep your long-term and short-term goals in mind and find the fund accordingly.
- It is important to check the fund’s performance before investing. However, you also must remember that the fund may not perform the same way yearly.
- Ensure your fund is not over-diversified, as it can dilute your profits.
Conclusion
Mutual funds can be a good investment option only when you understand the workings of the fund. Ensure it aligns with your investment objective. You can do your research or contact a financial advisor before investing.
FAQs
Can NRIs invest in mutual funds in India?
Yes. NRIs are allowed to invest in mutual funds in India. However, you can check the scheme’s terms and conditions before investing.
How much money can I invest in mutual funds?
There is no maximum limit to investing in mutual funds. But pick a fund according to your investment goal, risk appetite and fund performance. Also, ensure you have left some money for emergency funds.
Do we need a Demat account to invest in mutual funds?
No. Having a Demat account to invest in mutual funds is not mandatory. However, you must complete your KYC with the AMC (Asset Management Company) you are picking to invest in mutual funds. The KYC includes the basic details of an investor.
As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision.
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