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7 Best Mutual Funds to Invest in 2023 - Top Performing Mutual Funds in India

We are nearing the end of 2022 and it is time to welcome 2023. And what better way to welcome the new year than by securing your financial future by investing in some of the best mutual funds around!

We've curated a list of the 7 best-performing stock mutual funds to invest in in 2023. But before we reveal the list, here's how the stock market will behave in 2022...

2022 started with major stock indices showing strong consolidation from all-time highs due to the rapid spread of the Omicron variant of COVID-19, followed by the war in Ukraine. Economic uncertainties and inflationary pressures caused by these two factors, coupled with fears of a global recession, have caused foreign investors to stop investing in Indian stock markets, leading to heavy losses for investors.

However, things turned around towards the second half of the calendar year, as the Indian economy showed resilience compared to its global peers, despite facing high inflation. As a result, the stock market rose sharply and retested the previous highs. Overall, year to date, the Nifty 50 Index is up 5.5 percent (as of November 18, 2022), while the Nifty 500 Index is up 3.7 percent over the same period, having gained 24.1 percent and 30.2 percent respectively in the previous calendar year.

Best Mutual Funds to Invest in 2023

Which are the best mutual funds to invest in 2023?
Finally, let's look at the top 7 equity mutual funds to invest in for a better future in 2023.

Large Cap Fund Class - Canara Robeco Blue Chip Equity Fund
According to the SEBI rating, large-cap funds invest at least 80 percent of their pools in stocks (shares) and equity-related instruments of large-cap companies, which are recognized as the 100 largest companies by market capitalization. The advantage of investing in large-cap companies is that they are well established, have a trusted brand, a competitive advantage, a strong balance sheet, and an economic moat.

Due to their huge cash reserves and high demand for products, large-cap companies can handle economic downturns much better than small and midsize companies. For this very reason, large funds should ideally form a predominant part of all investors' portfolios. The Canara Robeco Blue Chip Equity Fund is one of the best large-cap mutual funds to invest in 2023.

Fund Category Flexi Cap - Parag Parikh Flexi Cap Fund
Flexible capital mutual funds must invest a minimum of 65 percent of their assets in stocks and stock-related instruments with dynamic asset allocation across large, medium and small stocks. Due to the flexible investment mandate to invest in stocks by market capitalization, flexible capital funds are less risky than small- and mid-cap funds. However, tight-cap funds tend to outperform large-cap pure funds.

Parag Parikh Flexi-cap Fund is one of the best flexi-cap funds to invest in 2023. Launched in May 2013, the fund is still more oriented towards the value investing style, aiming to invest in quality stocks at through available market limits at reasonable valuations. or attractive. The fund also has some exposure to shares of external companies such as Alphabet Inc, Microsoft Corporation, Amazon and Meta.

Mid-Cap Fund Category: Quantum Mid-Cap Fund
Mid-cap mutual funds are mandated to invest at least 65 percent of their assets in stocks and equity-related instruments of mid-cap companies, ranked 101-250 in terms of market capitalization.

Since these stocks are from relatively smaller/niche companies, they are less resilient during market downturns. However, they have the potential to generate high returns in the bull market phase as the shares of the underlying companies have not yet entered their growth stage. That is why we recommend investing in these only if you have a high risk appetite and an investment horizon of at least 5-7 years. One of the best mid-cap funds to invest in 2023 is Quant Midcap Fund.

Small Cap Fund Category - SBI Small Cap Fund
Compared to other categories, this is by far the riskiest on our list of the best stock mutual funds to invest in 2023. Small funds are stock-oriented mutual funds that are mandated to invest at least 65 percent. of its assets in stocks and shares: small business instruments with relevance. Small companies are defined as companies that rank above 250 in terms of total market capitalization.

Although small-cap companies have high return potential, there are several risks associated with them. Sometimes, if there are resource constraints, they may be at risk of surviving an economic downturn. These factors make small cap funds only suitable for investors with a high appetite for risk and an investment horizon of at least 7-10 years. SBI Small Cap Fund is one of the best medium funds to invest in 2023.

Value Fund Category - ICICI Pru Value Discovery Fund
Value investing is a proven strategy that involves identifying/finding stocks that are trading below their intrinsic value.

The Value Fund is authorized to invest a minimum of 65 percent of its assets in value stocks by market capitalization. While value funds tend to underperform during a market rally based on growth stock-led momentum, time and time again, value stocks have proven to be your best bet during market downturns. But remember that patience and a long-term investment horizon are essential when investing in value funds.
One of the best value funds to invest in 2023 is ICICI Pru Value Discovery Fund. Launched in August 2004, the ICICI Prudential Value Discovery Fund is a truly value-oriented scheme that looks for undervalued stocks with the potential for higher returns.

ELSS Category - Parag Parikh Tax Savings Fund
ELSS, also known as tax-saving mutual funds, are diversified equity funds that come with the double advantage of wealth-building potential and tax-saving benefits. According to SEBI's rating criteria for mutual funds, ELSS are open-ended schemes with a 3-year legal lock-in and tax benefits. ELSS invests at least 80 percent of its assets in shares and share-related instruments.

An investment in ELSS is eligible for deduction under Section 80C of the Income Tax Act up to Rs 1.5 lakh in a fiscal year. One of the best ELSS to invest in 2023 is the Parag Parikh Tax Savings Fund.

How to invest in the best mutual funds in 2023?
Given the volatile and uncertain nature of equity markets, take the Systematic Investment Plan (SIP) route as you build a portfolio of the best equity-oriented mutual funds in 2023. Click here to read about the benefits of investing in mutual funds via SIP.

You may also consider choosing the direct plan option for mutual funds to boost portfolio returns, as the expense ratio for direct plans is about 50-100 basis points lower than a regular plan.

Also Read: Where should you invest your Diwali bonus, gifts? Mutual fund advisors offer help

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