A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities. As an investor, one can buy mutual fund 'units', which basically represent one's share of holdings in a particular scheme. These units can be purchased or redeemed as needed at the fund's current net asset value (NAV). These NAVs keep fluctuating, according to the fund's holdings. So, each investor participates proportionally in the gain or loss of the fund. All the mutual funds in India are registered with SEBI. These function within the provisions and regulations created to protect the interests of the investor. The biggest advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would otherwise be quite difficult to create with a small amount of individual capital.

An Equity Linked Saving Scheme (ELSS) is a tax saving mutual fund scheme that helps investors to save taxes under Section 80C of the Income Tax Act. Top funds are those which are consistently beating category returns and rated well in ELSS category.

1. Tax saving instrument with the lowest lock-in period of 3 years
2. Better returns potential with SEBI mandate of minimum 80% investment in equity & equity related instruments
3. Ideal for seeking long term capital appreciation inspite of 10% Long Term Capital Gains (LTCG) Tax.

Debt funds whose returns are more than a conventional fixed deposit instrument for a given time period. Fixed deposit rates vary from bank to bank and in different time periods also. So, a standard annualized rate of 8% p.a. is taken as a benchmark for fixed deposits. The rate is slightly greater than the rate offered by a conventional fixed deposit instrument. The debt schemes which provide better than 8% annualized rate will fall under this category.

1. A fixed deposit is subject to TDS @ 10% (20% for non-PAN users) by the bank if interest income is greater than Rs. 40,000 as per Assessment Year 2020-21, except some exceptions. Please note that FD interest income is taxable as per the income-tax slab rate. So, an individual lying in the higher tax bracket will have to bear additional tax basis his/her tax slab apart from TDS.
2. Debt funds are subject to Short-term Capital Gains tax (upto 3 years) as per income tax slab and Long-term Capital Gains tax (more than 3 years) @ 20% after indexation.
3. No Securities Transaction Tax on sale of debt fund units

Funds which generate better returns and have low expense ratio vis-à-vis category. High returns and low costs are two key parameters wich an investor should look for while investing in a mutual fund. Returns are usually determined by the amount grown within a defined period. Cost in a mutual fund is the total expense ratio which an investor has to bear for investing in various mutual fund schemes.

Top rated hybrid funds giving good returns. Balanced funds or Hybrid funds are that class of funds that invest in both equity & debt instruments.

1. Aim is to balance the risk-reward ratio, thereby, optimizing the return on investment
2. Equity-oriented hybrid schemes are taxed in the same way like equity schemes
3. Debt-oriented hybrid schemes are taxed in the same way like debt schemes

Schemes whose minimum SIP investment are starting from as low as Rs. 500. Systematic Investment Plan is an investment strategy wherein an investor needs to invest the same amount of money in a particular mutual fund at every stipulated time period. Investing in SIP enables an investor to take part in the stock markets without actively timing them and he/she can benefit by buying more units when the price falls and less units when the price rises. This scheme helps reduce the average cost per unit of investment through a method called Rupee Cost Averaging.

Mid-cap mutual funds are those that invest at least 65 per cent of the corpus in companies lying between 101-250 by market capitalisation. Top performing mid cap funds are the top rated mid cap funds giving good returns.

1. These companies have the potential to become large companies in future years
2. Ability to outperform even large-cap funds or diversified equity funds during a bull run
3. Suitable for aggressive investors having the appetite for taking higher risk and have long investment horizon
4. Gains on equity funds are subject to taxation @ 15% for holding period less than 1 year and @ 10% for more than a year if gains are more than 1 lakh

A multi cap fund is one that invests across large cap, mid cap and small cap stocks. Such funds are mandated to invest at least 65 per cent of the corpus in equity & equity related instruments. Promising multi cap funds are the top rated multi cap funds giving good returns.

1. Investor can take advantage of investing in large, mid & small caps if he doesn't want to have a fund in each of these 3 categories
2. Ability to deliver substantial returns during a bull run & could outperform even a pure large-cap or mid-cap fund
3. Suitable for investors who are willing to take moderate risk, who want to have stable returns by investing in large & giant companies but at the same time would want to expose some of their portfolio for mid & small cap too to attain better returns
4. Rebalancing across market caps is available at a lower cost since switching amongst large, mid and small cap mutual funds may involve exit load & capital gains taxation
5. Gains on equity funds are subject to taxation @ 15% for holding period less than 1 year and @ 10% for more than a year if gains are more than 1 lakh

Mutual funds which are best rated and giving superior returns across various categories. Rating is one of the key parameters while evaluating the performance of a mutual fund scheme. It lends credibility to a scheme's performance and at the same time helps an investor filter out the best schemes out of all available within a given category.