The practice of investing in mutual funds is not as old as investing in fixed deposits or term deposits in India. Most Indians have traditionally opted for safer money saving and investing options that include FDs, Post Office Saving Schemes and PPFs. MF will take some more time to inspire the same level of trust as the old-school savings and investment methods. However, in the past decade, people have taken more interest in MFs than they had in the 90s.
Smart investors have come to realize that the only way to override the high rates of inflation in India is by taking an interest in MFs. It is important for every novice and experienced investors to vet their options of investment thoroughly. As every mutual fund company states – “MF investments are susceptible to market risks”, there are two ways to ascertain the safety of the funds you are investing in:
- The reputation of the company or institution, and its history of operations.
- The capital protection and terms of return upheld by the fund house of your choice.
Today, the presence of countless mobile applications and online sites, that give the investor a direct access to a fund’s performance, history and trends of returns, has made investing in MF a lot safer than it was even 5 years ago.
The 5 Safest MF Investment Options
Nonetheless, while looking at different investment options, you should pick MFs that have had a steady performance in the last couple of years. You should only pick trusted and well-established fund houses. Here’s a list of the five mutual funds we believe are the safest for any Indian investor in 2019 –
1. Franklin India Focused Equity Fund
The Franklin India Focused Equity Fund hit the markets in January 2007. It has shown steady performance for almost 12 years. It is one of the safer mutual funds for long-term investments.
If you check the past 3-year period, the scheme has generated an average return of 12.81%. Although, it is much lower than the benchmark (Nifty 500-tri) returns, the 5-year returns of the franklin India Focused Equity Fund are rewarding at 20.27% against the benchmark 15.15%.
Franklin India Focused Equity Fund has invested close to 69% of the assets in large cap companies, 17% in small cap and 14% in mid cap companies. The scheme has invested in the following sectors – banking (36.08%), petroleum products (10.25%) and pharmaceuticals (7.08%). The steady performance of these sectors ensure more security to the investors who have chosen this scheme.
2. SBI Focused Equity Fund
The SBI Focused Equity Fund has been around since September 2004. It is a diversified fund that has provided an impressive return of 13.46% for the 3-year period. It is as close as it gets to its S&P BSE 500 benchmark of 13.97%. However, for a 5-year period, the SBI Focused Equity Fund has generated a healthy return of 18.72% against the benchmark 15.22%.
The SBI Focused Equity Fund is one of the best performing mutual funds in the SBI Mutual Fund house. Its secret of stellar performance includes its highly diversified portfolio where only 50% of the assets have been invested in large cap companies. The scheme has invested 13% and 22% in mid cap and small cap holdings respectively. It has allocated close to 31.30% to the Financial Services sector, 21.15% to Consumer Goods and 7.27% to service sectors. Its aggressiveness in combination with high diversification makes this SBI Mutual Fund scheme one of the safest in the market in 2019.
3. Kotak Standard Multicap Fund
After its launch in 2009, the Kotak Standard Multicap Fund has been providing steady returns for the last decade. It is one of the few schemes that have outperformed its benchmark in the last 3-year and 5-year periods. The scheme has generated a 3-year return of 14.06% against a benchmark of 14.09%, and a 5-year return of 19.37% against the benchmark of 14.81%.
The Kotak Standard Multicap Fund is relatively conservative when the question of diversification arises. It has invested only 1% of its assets in small cap, 20% in mid cap and approximately 79% in large cap companies. According to reports, its sector-wise allocation has provided maximum exposure to the Financial Services section (35.7%), Energy Sector (14.1%) and IT Sector (8.48%).
The Kotak Standard Multicap Fund has proven to be one of the safest and most stable funds for investors with a low risk appetite.
4. Invesco India Multicap Fund
The Invesco India Multicap Fund has been around for more than 10 years. In the last 3-year period, it has yielded a return of 9.63% against a benchmark of 13.62%. However, its 5-year return performance has been commendable at a return rate of 19.27% against a benchmark of 15.16%.
The relatively aggressive mutual fund scheme has invested around 45% only in large cap funds, 35% in mid cap and 20% in small cap companies. The top three sector allocations of this scheme includes Banking, Software and Finance.
5. Reliance Focused Equity Fund
The Reliance Focused Equity Fund has been around in the market since 2006 and till date it has not disappointed the investors. With a 3-year return of 14.13% and 5-year return of 26.31%, it has always been quite ahead of its S&P BSE SmallCap benchmark. It should be noted that the small cap and mid cap adjustments of the previous year has impacted the returns of Reliance Focused Equity Fund adversely, but its heavy reliance on large cap assets has helped it override the market volatility.
Reliance Focused Equity Fund has allocated close to 9% in small cap, 26% in mid cap and 65% in large cap companies as of January 2019. Its sector-wise allocation shows a rather aggressive approach with around 27.79% in Banking, 10.13% in Finance and 9.93% in Consumer Non-Durables.
Reliance Focused Equity Fund is the perfect choice for any investor with a high risk appetite and a yearning for higher returns.
Safety of mutual fund investments depends upon the current investment market, and the diversification of the fund portfolio. If you are unable to comprehend the fine points that influence the returns on your investment, it is always safer to invest via a fund house like SBI Mutual Fund, who can take good care of your money.