Diwali 2019: Want to become rich? Top 10 Mutual Fund investment options

Diwali 2019 tips to become rich: Diwali 2019 celebrations are underway and the festival of lights is considered one of the most auspicious occasions to take big investment decisions. For those who believe in making castles from the pebbles, a mutual fund is the most preferred option for them. However, there are several types of mutual funds and each fund has a different investment goal. Therefore, one who wants to become rich needs to know these types of funds and their goals.

Speaking on the mutual fund investment that can make you rich Pankaj Mathpal, Managing Director at Optima Money Managers said that mutual funds are of various types and each type has different investment goals and their returns also vary with little change in their investment time-period. Asked about the top 10 mutual fund options that an investor can think of initiating investment on Diwali 2019 Pankaj listed out the following options:

1] Liquid Fund: Ideal for parking money for the short term. Invest in Liquid fund when you want to set up a Systematic Transfer Plan. You can transfer the money form liquid funds to equity funds systematically.

2] Debt Fund: Debt provides stability to the portfolio. Holding a period of more than 3 years qualifies for long term capital gain. Long term capital gain from debt scheme is taxed at 20 per cent with the benefit of indexation and hence, it's more tax-efficient compared to fixed deposits.

3] Equity Saving Funds: These are debt-oriented Hybrid Schemes. Have exposure in Equity, debt and arbitrage. It qualifies for equity taxation through actual exposure in the equity is low.  Equity exposure is around 25 per cent in these schemes. Ideal for investors who are looking for investment around 1 year to 2 years or senior citizens who want limited equity exposure.  

4] Aggressive Hybrid Funds: Equity exposure is 35 per cent and debt exposure in 35 per cent. An ideal combination of safety and growth. Ideal scheme for new investors. Qualifies for equity taxation.

5] Equity Large-cap: Invest in the top 100 companies by their market capitalization. Large Cap companies witness lower drawdown as compared to mid and small-sized companies. Blue-chip stocks are less volatile mid-cap and small-cap stocks.

6] Equity Mid-cap: Invests in the companies with ranking from 101 to 250 by market capitalization. An investor with a time horizon for more than 5 years should consider mid-cap funds in their portfolio. Suitable for SIP.

7] Equity- Small-cap: Investors should have limited exposure in small-cap funds and only when the time horizon is very long. Small-caps are highly volatile but outperform the large caps during the market rally.

8] Equity Multi-cap: These schemes invest across market capitalization. The fund manager decides the allocation in large-cap, mid-cap and small-cap stocks based on the market situation.

9] International Funds: Investors are benefited from international exposure in companies like Apple, Facebook, Google and Amazon etc. Investors are benefited from the performance of international companies that are not listed in India. Ideal for portfolio diversification. Investors should have limited exposure to such schemes.

10] Tax Saving Funds: Ideal tax saving scheme under Section 80C of Income Tax Act 1961. Lock-in in 3 years. It provides an opportunity for tax saving and growth. Investors should link their investment in ELSS to their long term goals.