Best mutual funds to invest 2023

by 5paisa Research Team Last Updated: Mar 03, 2023 - 11:17 am 1.3k Views

For decades, mutual funds have been a favoured investment option for individuals looking to diversify their portfolios and benefit from professionally managed portfolios of stocks, bonds, and other securities. Mutual funds offer several attractive features, such as a wide range of investment options, low expense ratios, and liquidity. 

Despite these benefits, selecting the best mutual funds can be challenging. To help investors navigate this process and formulate an effective investment strategy, this article will evaluate some of the best mutual funds to invest in and the top mutual funds in 2023!

What are the Best Mutual Funds?

Mutual funds are available in various types, each of which can be categorised based on their underlying assets, such as equity, debt, or gold. This classification gives rise to different categories of mutual funds, such as equity mutual funds, debt mutual funds, and hybrid funds. Each category has a distinct risk profile and investment objective.

As a result, no one-size-fits-all mutual fund is suitable for every investor. The best mutual fund/s for an individual will depend on their investment objectives, risk tolerance, and investment horizon. For instance, if an individual invests in their child's higher education, which is 15 years away, equity mutual funds may be the best option as they are better suited for long-term investments. 

However, even within equity mutual funds, there are sub-categories such as large-cap funds, mid-cap funds, and small-cap funds, and an individual can choose which one to invest in based on their risk-taking capacity.

On the other hand, if an individual has short-term investment goals, they may need to invest in different mutual funds to achieve these goals. For example, if an individual's second goal is to buy a car in the next three years, investing in equity funds may not be the best option. Instead, they can consider investing in debt mutual funds, which are relatively less volatile than equity funds and can help achieve their goal of purchasing a sedan.

How to Select the Top Performing Mutual funds in India?

The best mutual funds to invest in are determined by the following factors.

●    Investment Objectives
Before making any investment, you should thoroughly examine your life goals. The next step is to compare them with the objectives of a mutual fund scheme and then decide whether investing in it will help you achieve these goals. Each mutual fund scheme has a specific investment objective, and investors must decide if their goals align with that of the fund scheme they intend to invest in.

Equity mutual funds, for example, aim to achieve wealth creation. As a result, equity mutual funds are best for investors who want to build long-term wealth for long-term goals such as building a retirement corpus. As equities are more likely to generate high returns than debt funds, buying predominately equity funds in this scenario makes more sense than debt funds. Investing mainly in debt funds will not result in the same retirement corpus as investing in equity funds.

For this reason, an investor's investment goals and risk tolerance must coincide with the fund's investment objective.

●    Expense Ratio
The company that manages the fund charges a fee for taking care of it called the expense ratio, a percentage of the fund's total value. The expense ratio and other charges are deducted from the mutual fund returns, which are the profits made by the fund's investments. This means that if the expense ratio is high, the investor will earn less money. To get the most return on their investment, investors should choose a fund with a lower expense ratio than other similar funds.

●    Fund’s History
The history of a fund shows how well it has performed over time, even during tough market conditions. However, it can be hard to predict the returns of new funds that haven't been around for long. That's why it's better to choose a mutual fund with a long track record of delivering good returns consistently across different market cycles. This shows that the investment strategies have been well-researched and tested.

●    Fund Manager’s Performance
The person in charge of managing the fund is called the fund manager. It's important to check the fund manager's past results to witness their performance over time. As an investor, you should monitor how the fund is doing during market highs and lows. You can also check how the fund manager has done with other investment options they've managed.

●    Taxes
When choosing mutual funds, taxes should be factored in; some funds are taxable, while others aren't.

How Tax is Applied on Best Mutual Funds in India?

In mutual funds, you can earn income in two ways: through capital gains and dividends. Dividends are taxed based on your income tax slab, while capital gains tax depends on the type of fund and investment period.

Equity funds invest at least 65% of their assets in equities and equity-related instruments. If you sell your equity mutual fund units within a year, the gains are Short Term Capital Gains (STCG) and are taxed at 15%. If you sell after a year, the gains are Long Term Capital Gains (LTCG), and gains over Rs. 1 lakh are taxed at 10%.

For non-equity funds like debt or gold funds, gains from selling your units before three years are Short Term Capital Gains and are added to your total income, taxed as per your income tax slab. If you stay invested for over three years, they are Long Term Capital Gains and are taxed at 20% with indexation.

Hybrid funds' tax on capital gains depends on their underlying asset allocation. If over 65% of the portfolio is in equities, it will be taxed like an equity fund. If it has less than 65% allocation to equities, it will be taxed like a debt fund.

Who Should Invest in Best Mutual Funds?

Mutual funds can be a suitable investment option for various investors with different investment goals, risk profiles, and horizons. The best mutual funds to invest in India are typically preferred by:

1.    Investors who want to achieve their financial goals: Individuals looking to achieve their financial goals, such as retirement, a child’s education, or buying a house, can invest in the best mutual funds per their needs. Investing in mutual funds that have delivered better returns than their peers consistently can help them achieve their goals faster.

2.    Investors who are looking to invest regularly: Individuals looking to invest in mutual funds regularly can do so through Systematic Investment Plan (SIP). They can invest a fixed amount every month, week, or quarter in the best SIP mutual funds to make their investment goals a reality.

3.    Investors looking for better returns than traditional saving options: Traditional saving options like bank fixed deposits offer guaranteed interest rates, but the returns are usually lower than mutual funds. Investors looking for higher returns than traditional saving options can consider investing in the best-performing mutual funds.

4.    Investors who are ready to take more risk: Different types of mutual funds have different risk-return profiles. Investors willing to take more risk can invest in high-return mutual funds that offer the potential for better returns.

5.    Investors looking for expert fund management: Mutual funds are managed by professional fund managers who aim to generate high returns by selecting the best stocks or debt instruments. Investors looking for expert fund management can invest in the best mutual funds.

6.    Investors looking for diversification: The best-performing mutual funds invest in a basket of securities, providing diversification benefits to investors, irrespective of their investment amount. Diversification can help investors mitigate the negative impact of a single investment's poor performance on the total portfolio and achieve consistent returns.
Factors To Consider Before Investing in Mutual Funds
Factors to consider before investing in the best mutual funds in India in 2023 are:

●    Investment Objective: Determine your investment goals and risk tolerance before choosing a mutual fund.

●    Fund Performance: Analyse the fund's past performance over multiple market cycles to determine if it has consistently performed well.

●    Expense Ratio: The expense ratio reflects the annual fees charged by the fund house for managing the fund. Lower expense ratios may lead to higher net returns for investors.

●    Fund Manager: The fund manager's experience and track record can play a significant role in the fund's performance. Look for a manager with a strong track record and investment style that aligns with your preferences.

●    Exit Load: Some funds have exit loads, which are fees charged to investors who sell their units before a specific period. Evaluate the exit load charges before investing.

●    Risk: Consider the risk associated with the fund and evaluate whether it aligns with your risk tolerance level.


Mutual funds have proven to be a lucrative investment option for Indian investors in the last decade, offering a cost-effective and easy way to diversify their portfolios while managing risk levels. By following the above tips, investors can choose the best-performing mutual funds in 2023.




Q1. Which is the best mutual fund to invest in now?

Ans. The best mutual fund to invest in depends on individual investment goals, risk tolerance, investment horizon, and financial situation. 

Q2. Which mutual fund gives the best returns?

Ans. ICICI Prudential Multi-Asset Fund Direct-Growth is one of the mutual funds with the best returns.

Q3. What are the top 3 mutual funds?

Ans. The top 3 mutual funds are:
1.    Axis Bluechip Fund
2.    Mirae Asset Large Cap Fund
3.    Parag Parikh Long-Term Equity Fund

Q4. What is the safest mutual fund?

Ans. There is no single mutual fund that can be considered the safest, as the level of risk associated with a mutual fund can vary based on various factors, such as the type of assets the fund invests in, the fund's investment strategy, and the market conditions.

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