Small cap funds invest in equity stocks of smaller companies whose total worth of is Rs. 500 crore or less. While it makes them volatile to market dips, the potential for growth is enormous. This is especially true if you are an individual investor.

If you want aggressive growth and have been investing for some time, small cap funds are an extremely beneficial investment for you. Here is why-

• The returns from small cap funds can be enormous if they perform well. These stocks are performing extremely well over the past few years. There have been instances of returns greater than 100% in a day. This attracts many investors looking to expand their wealth.
• They allow diversification of your portfolio.
• Some small capfunds perform well even when large cap funds do not put up impressive performances.
• They usually do not attract much attention from institutional investors, which makes them an untapped resource. Keep your eye out for investment opportunities in small capfunds and watch your investment reap huge returns.
• If you are a seasoned investor who has a good idea about the entry and exit times, not investing in small capfunds is missing an opportunity to expand your wealth.
• If you are in for the long race and can stomach lows of the market, you must invest in small capfunds, as their long term performance is impressive.
• Smaller companies offer more flexibility to investors as compared to large cap
• There are always chances that larger companies acquire the small companies that you invest in. This means attractive prospects for your finances if you have invested in such companies.

Prudent selection of stocks is crucial for the successful performance of any portfolio. Selecting small cap funds is a beneficial decision if you are a young investor who knows how the market works and aggressive growth is your style. It is recommended that you remain invested for at least 5 to 6 years to reap significant returns.

Mutual funds are made of various kinds of units that belong to either debt or equity. Both have their pros and cons. While equity funds boast of high returns, the level of risk is considerably high. With debt, you are assured of a return but it is quite low. The best course of action, if you want to get high returns without running high risks, is to invest in hybrid funds.

What are Hybrid Funds?

Hybrid funds split the investment into both debt and equity to strike the perfect balance of risk and returns. It also allows adequate diversification without jeopardising your objective behind the investment. They meet your long-term goal of wealth creation and your short-term goal of a regular income at the same time. The proportion of money in debt and equity is determined depending on your financial goals. Therefore, they may lean towards equity or debt. By investing more than 65% in equity, your portfolio becomes equity oriented and by investing more than 60% in debt, it becomes debt-oriented. You can also choose to maintain liquidity by investing in cash assets.

They are considered quite safe as the risks are lower than equity-based funds and returns are higher than debt centric funds. This makes hybrid funds a favourite among new investors. Some types of hybrid funds allow re-allocation of assets in debt and equities to make the best of the market.

Types of Hybrid Funds

• Balanced Funds
• Monthly Income Plans
• Arbitrage Funds

What are Balanced Funds?

If your investment portfolio contains at least 65% of the assets in equities, it is a balanced fund. Holding such instruments make you eligible for tax benefits. It is suitable for conservative investors who want moderate returns without the risks.

What are Monthly Income Plans?

Such investments, invest around 15%-20% in equities to get higher returns than debt funds. You get a regular income as dividends, whose frequency you get to decide. You can also choose to use the dividend to grow the corpus of your fund. Thus, it is an income fund as well as a growth fund.

What is Arbitrage Funds?

They are a type of mutual fund that exploits the price difference of equities on different stock exchanges. Simultaneous buying and selling of securities is a feature of such funds. When there are no price mismatches, the money remains invested in debts or money market instruments.

Advantages of Hybrid Funds

• High returns with lower risks.
• Diversified portfolio
• Taxation benefits for equity-oriented portfolios.
• Meet short-term goals and long-term goals through the same investment.
• Best for new investors

While hybrid funds are not completely free of risks, it is less risky compared to other funds like equities. As long as you keep re-balancing your portfolio to suit the market trends, you will reap returns. To make the best of hybrid funds, goo for medium-term investments, like 5 years. This way you will keep meeting your long-term goals as well as your short-term goals.

SIP is a method of investing in mutual funds. Instead of investing a lump sum, you divide your payments over a period according to your convenience. The periodicity of the SIP can be monthly, quarterly or annually. SIP is a boon for investors who do not have the cash to invest a lump sum amount. However, like most successful things there are many myths surrounding the concept of SIPs.

Here are some of the most common myths –

Only for Small Time Investors

Sip is a systematic investment strategy that inculcates good investment habits regardless of the type of investor you are. While there is a lower limit to the amount you can invest per instalment, there is no upper limit.

Instalment Defaults Result in Huge Penalties

The truth is there are no penalties if you miss paying your payments. The only thing that happens is that you miss the opportunity of buying the units that were slated to be bought during that period.

SIP Guarantees Returns

No mutual fund scheme ever guarantees returns. It does, however, minimise the risk of losing the capital. This is because the money is being invested as instalments and not as a lump sum. It is among the major benefits of SIP.

Do Not Start A SIP When Market Is High

On the contrary, it is the best time to start a SIP. This is because you will be able to collect more SIP units for a given price by the time the market returns to its stable condition. It translates to more gains while the NAV is falling.

Lump Sum Investment Is Not Possible In SIP

You can invest a lump sum in your SIP scheme as there is no upper limit to the instalments and there are no penalties for missing an instalment. From the perspective of the investment, a lump sum deposit and deposit in parts make no difference. You instalment value should match your risk appetite, investment objectives, the period of instalment and amount of money available.

Benefits of SIP is Limited to Long-Term Investments

Although it is recommended to go for long-term investments, especially with equities, you can also opt for shorter terms. The duration of the SIP can be anything from 6 months to more than 10 years.

Time Period of SIP Cannot Be Changed

There is no fixed period when it comes to a SIP. The SIP continues as long as you pay the instalments and is not active when you are not paying. You can stop the SIP at any time you wish to.

SIP in Any Mutual Fund is Successful

Just by starting a SIP your investment will not be successful. You have to devote time to selecting the correct schemes to invest in. You have to properly analyse and compare the various funds available and select the best fund to suit your needs.

A large number of people are subscribing to SIP. It gives you the benefits of a cost averaging and compounding investments. Since it has the potential for wealth creation, having accurate knowledge about what is SIP and the benefits of SIP are essential. Once you have the knowledge, you can make the best of your investments and meet your short-term and long-term financial goals.

Mutual funds are of several types. If you are wondering what is arbitrage fund, then the answer is it is a type of mutual fund. It makes profits by buying a stock at one stock exchange and selling the stock for a higher value at a different stock exchange. Thus, there is a simultaneous purchase and sale of units. They usually consist of equities but debt and money market equities can also make up a small portion.

You can buy a close ended mutual fund at a discount and sell it at a premium on a different exchange. Since this difference is not substantial, you need to buy and sell a large number of stocks to make a significant profit.

If the prospects of arbitrage funds have you excited, here is a list of the top funds to invest in.

Axis Enhanced Arbitrage Fund

This arbitrage fund aims for absolute returns to create a source of income. It capitalises on the derivatives as well as cash segments of equity mutual funds. If there are any balances left, the amount is invested in debt and money market securities to earn short-term returns. It has an annualised return of 7.04%.

ICICI Prudential Equity Arbitrage Fund

The objective of this arbitrage fund is to generate returns that are less volatile. To do this, it uses derivatives of the equity market. Secondary investments from short-term investments in debt and money market funds also form a small portion of the portfolio. The fund was able to reap consistent annualised returns of 6.9% in the past few years.

Kotak Equity Arbitrage Fund

Despite being new to the mutual fund market in India, it is a low-risk option that attracts many. It has proven itself as a strong and consistent performer. The annualised return is 6.85%. If your goal is capital appreciation, this is among the best funds to choose.

L&T Arbitrage Opportunities Fund

With an annualised return of 6.83%, the performance of this fund has been remarkable over the past years. The returns are generated mostly from equities, but there is a fair percentage of debt and money market securities too.

Aditya Birla Sun Life Enhanced Arbitrage Fund

It is among the top hybrid mutual funds that are heavily dependent on equities. It exploits opportunities of earning profits on the differential valuation of securities in different markets. This fund has outperformed itself over the past years and you can expect annualised returns of 6.73%.

Invesco India Arbitrage Fund

The main source of income for this fund is the gap in prices between the cash and derivative markets. It also uses debt and money market units to provide a source of additional income. Previous performance has shown annualised returns of 6.7%.

HDFC Arbitrage Fund

Use your extra cash in debt and money market instruments to generate income. This arbitrage fund has overshot its benchmark and has been providing annualised returns of 6.52%. With consistent performance and clear growth, it is definitely among the best arbitrage funds to invest in.

Now that you know exactly what is arbitrage fund and how investing in it can earn create a source of income, all you need to do is use this list to select the perfect arbitrage fund to suit your need. Leave the rest to the fund manager and watch your money grow!

Mutual funds are of several types. If you are wondering what is arbitrage fund, then the answer is it is a type of mutual fund. It makes profits by buying a stock at one stock exchange and selling the stock for a higher value at a different stock exchange. Thus, there is a simultaneous purchase and sale of units. They usually consist of equities but debt and money market equities can also make up a small portion.

You can buy a close ended mutual fund at a discount and sell it at a premium on a different exchange. Since this difference is not substantial, you need to buy and sell a large number of stocks to make a significant profit.

If the prospects of arbitrage funds have you excited, here is a list of the top funds to invest in.

Axis Enhanced Arbitrage Fund

This arbitrage fund aims for absolute returns to create a source of income. It capitalises on the derivatives as well as cash segments of equity mutual funds. If there are any balances left, the amount is invested in debt and money market securities to earn short-term returns. It has an annualised return of 7.04%.

ICICI Prudential Equity Arbitrage Fund

The objective of this arbitrage fund is to generate returns that are less volatile. To do this, it uses derivatives of the equity market. Secondary investments from short-term investments in debt and money market funds also form a small portion of the portfolio. The fund was able to reap consistent annualised returns of 6.9% in the past few years.

Kotak Equity Arbitrage Fund

Despite being new to the mutual fund market in India, it is a low-risk option that attracts many. It has proven itself as a strong and consistent performer. The annualised return is 6.85%. If your goal is capital appreciation, this is among the best funds to choose.

L&T Arbitrage Opportunities Fund

With an annualised return of 6.83%, the performance of this fund has been remarkable over the past years. The returns are generated mostly from equities, but there is a fair percentage of debt and money market securities too.

Aditya Birla Sun Life Enhanced Arbitrage Fund

It is among the top hybrid mutual funds that are heavily dependent on equities. It exploits opportunities of earning profits on the differential valuation of securities in different markets. This fund has outperformed itself over the past years and you can expect annualised returns of 6.73%.

Invesco India Arbitrage Fund

The main source of income for this fund is the gap in prices between the cash and derivative markets. It also uses debt and money market units to provide a source of additional income. Previous performance has shown annualised returns of 6.7%.

HDFC Arbitrage Fund

Use your extra cash in debt and money market instruments to generate income. This arbitrage fund has overshot its benchmark and has been providing annualised returns of 6.52%. With consistent performance and clear growth, it is definitely among the best arbitrage funds to invest in.

Now that you know exactly what is arbitrage fund and how investing in it can earn create a source of income, all you need to do is use this list to select the perfect arbitrage fund to suit your need. Leave the rest to the fund manager and watch your money grow!

There are different kinds of investments for people with different financial goals, risk tolerance, and knowledge of the market. If you have a fair understanding of an industry that you think will be doing well and an appetite for taking risks, sector funds can yield you high returns.

What is Sector Fund?

A sector fund is a type of equity mutual fund that invests in a particular sector of the market such as technology or healthcare. They are more volatile compared to the entire market because of the lack of diversification. However, it is also the reason why you can beat the market if the sector you bet on sees growth. If you have the talent of spotting potential for growth in a particular sector, you can use it to gain large returns through sector funds.

Why Must You Invest In Sector Fund

Sector funds, despite being extremely volatile, offer several financial advantages that you will not get in other types of mutual funds.

• There is a high potential for capital growth. In sector funds, your capital grows significantly when that particular sector witnesses high growth.
• If a particular sector is growing steadily, creating a diverse portfolio across various companies of that sector yields large returns compared to other mutual funds. However, you must know when to exit.
• If you are investing in sector funds beside your core, diversified portfolio, you have the opportunity to boost your total return.
• If your portfolio does not have adequate exposure to a certain sector that you are confident will do well, investing in sector funds is a great idea.
• If your style is aggressive when it comes to investments, sector funds suit your financial goals like no other investment.
• If you are investing for the sake of long-term wealth creation, sector funds can generate huge profits for you due to their cyclic nature. However, you must be able to patiently wait out the cyclic lows.

If you are okay with sudden losses and sudden gains, sector funds are the perfect vehicles of wealth multiplication for you. There is no point missing out the on the profits a hot sector can generate if you can stomach the risks. Now that you know what is sector fund, get researching on the performances of various sectors and start investing. However, do not invest on a hunch or a past trend. Only invest when you are confident of growth in a particular sector.

Mutual funds refer to professionally managed funds that pool money from multiple investors and invest in the market. This money is used to buy securities that belong to different asset classes like debt, equity etc.

Mutual funds are the best way to take advantage of the market while minimizing the risk attached to it. However, before you start investing, you need to be aware of the various types of mutual funds available.

The types of mutual funds include-

Based on Asset Class

Equity Funds- These are high-risk funds with the capacity to deliver high returns.

Debt Funds- These are low-risk options that promise fixed returns. They include government bonds, debentures etc.

Money Market Funds- Liquid investments such as commercial papers and treasury bills make up a safe investment with moderate returns.

Hybrid Funds- These funds invest their resources into multiple asset classes like debt and equities. Balanced funds are an example of hybrid funds.

Sector Funds- These funds invest in specific sectors like automobile, pharmaceuticals etc. The risk and returns depend on the stability of the sector. Generally, sector funds are considered to be very risky.

Index Funds- These funds track and mimic the performance of a particular index.

Tax Saving Funds- A high-risk, high return option that invests mostly in equities to avail tax deductions under the Income Tax Act.

Based on Structure

Open-ended Funds- You can purchase or sell the units of this type of mutual fund throughout the year at the prevailing Net Asset Value (NAV). They promise liquidity to the investor.

Closed-ended Funds- These are illiquid investments. You can only redeem the investment after the maturity date.

Based on Objective of the Investment

Growth Funds- The portfolio mostly consists of equity stocks. The main purpose is to allow your capital to grow. They may be risky but are perfect as long-term investments.

Income Funds- These funds buy fixed income securities like debentures and bonds. They become a source of income while keeping your capital intact.

Liquid Funds- If you want to invest your surplus without compromising your liquidity, these low-risk options are the best. They include commercial papers and treasury bills that reap moderate returns.

Before investing your hard-earned money, conduct a thorough research into the market. With proper knowledge, the right kind of mutual fund investment will help you realise your financial goals in the long run.

Most people are aware of exactly what is mutual fund. It is a financial instrument that pools money from several investors and invests the pooled resources into the market.

No matter what your financial goal is, there is a mutual fund to suit your needs. However, the question that plagues most people is how to invest in mutual funds. If you too are unclear about it, here is a step by step guide on how to invest in mutual funds.

Step 1: Evaluate Your Financial Needs

You should decide how much capital you will invest keeping in mind your financial goals. There may be several short-term and long-term goals. Also, consider the period for which you intend to remain invested and your willingness to take risks.

Step 2: Research

Once you have the answers to the questions above, the next step is to pick a fund. To do this, see which categories of mutual funds complement your goals. Once you identify a category, select 5-6 best performing funds from it. Then study these funds in detail and pick the best one.

Step 3: Diversify

With mutual funds, you can invest either in stocks or in bonds. It is essential that you select a combination of equity and debt so that you don’t put all your eggs in one basket. This approach also reduces the risk profile of your investment.

Step 3: Make Room for Inflation

The money you invest now will decrease in value when you will ultimately redeem it. Therefore, when you are deciding on a capital for investment, make sure you keep enough provisions to combat inflation so the value of your money remains useful in the future. Money market mutual funds assure you the protection of your capital against inflation.

Step 4: Let Your Age Decide

It is wise to let your age determine the combination of debt and equities in your portfolio. Equities are high-risk options but the risks are averaged out for long-term investments. Therefore, younger investors can reap the benefits of higher returns through a larger share of equities in their portfolio. However, if your retirement is near, it is best not to venture in risks and invest in debt funds.

Step 5: Listen To Your Gut Instinct

When deciding the type of securities to include in your portfolio, do not take risks you are not comfortable with. Only go for risks you can handle.

Investing in mutual funds open you up to a range of benefits that include wealth multiplication and tax saving. Although selecting the correct mutual fund to invest in may be a challenging decision, identifying your goals and tolerance of risk simplifies the process considerably. With the correct approach and adequate diversification, you will be able to reap the benefits of a fruitful investment that secures your retirement plans along with your immediate financial goals.

A mutual funds investment is one of the best ways to multiply your wealth. However, there are many types of mutual fund options to choose from. To make the best of your mutual funds investment, it is advisable to have a portfolio that is a mix of debt funds, equity funds, hedge funds etc. The problem, however, arises when you want to change the composition of your fund based on the market scenario. Standard mutual funds do not have provisions for tweaking the composition – shifting from equities to debt and vice versa.

Dynamic funds, on the other hand, allow you to change between various asset classes like debt, equity, cash etc. according to market performance. Therefore, through a dynamic fund, you can always reap the benefits the market has to offer.  If this reason alone is not enough to convince you to invest in dynamic funds, here is a list.

Protection from Market Volatility

A dynamic fund automatically switches to the best performing asset class depending on the market conditions. This makes them less prone to its fluctuations and as a result, way less risky.

You Do Not Need To Be A Pro

Most people know it is best to invest in equities when the market is down and reap profits when the scenario improves. Yet it requires constant surveillance of the market and some degree of expertise to accurately predict market trends. However, with a dynamic fund, you can relax as your assets are reallocated to suit the market. All you need is a basic knowledge of how the market works.

Entry and Exit

Since asset reallocation is done by a formula and not by a fund manager, dynamic funds are super flexible when it comes to avoiding market crashes.

Lower Risk and Higher Return

The mutual fund mantra has always been higher risks reap high returns. However, a dynamic fund is the exact opposite. Despite being one of the least volatile investments, it assures high returns without the risk. Dynamic asset allocation controls your equity exposure to the market and ensures high returns.

Save on Taxes

Dynamic Funds, on an average, constitute of 65% equity. This allows it to fall under the same taxation category as equity funds. Therefore, with a long-term dynamic fund, you can get tax benefits associated with long-term capital gains.

If you have a basic understanding of the market but do not have the time or inclination to constantly keep track, a dynamic fund is your go-to option. You no longer need to time the market or take hefty risks in hopes of higher returns. Your dynamic fund portfolio will automatically balance itself to reap the best returns the market can possibly offer.