Can a doctor tell which medicine is best?
A doctor will prescribe you a treatment and medicines based on your health conditions. It’s not going to be same for each ailment. It’s also going to differ from person to person based on individual health conditions.
Similarly, there is no one best mutual fund. The best mutual fund(s) for you depends on following factors:
- Your Financial Goals
- You want to buy a car after 2 years? 2 years is short term and you are better off keeping most of your money in debt instruments like Fixed Deposits, Recurring Deposits or Debt Mutual Funds. Now we are in a better position to answer which debt mutual funds are best to invest in them to accomplish your financial goal? We still can not answer it completely (point 2).
- You want to build a house after 10 years? 10 years is long term and you can go with equity instruments - either direct stock or equity mutual funds. Again, now we are in a better position to answer which which equity mutual funds are best to accomplish your financial goal? We still can not answer it completely (point 2).
- Your Risk Taking Capacity - Your risk taking capacity depends on your psychological attitude towards financial risks and your financial condition to absorb fluctuations in your wealth which comes with taking risks. If you have a higher risk taking capacity, you would lean towards equity mutual funds. If you have lower risk taking capacity, you would lean towards debt mutual funds.
So, your Financial Goals + Your Risk Taking Capacity will together determine which mutual fund(s) are best for you. There are of course 1000’s of mutual fund schemes out there in the market and not every scheme is good. But, for each kind of requirement (Goal + Risk), we should be able to find some best schemes.
And, just like you consult a doctor for proper treatment of your health conditions, it’s highly recommended to consult a financial advisor to create a proper financial plan (treatment) for you and suggest the best schemes (medicines) for you.
I have also written a detailed article here which gives you an idea of how to choose the best scheme.
PS: I won’t recommend any best scheme here as I don’t know your goals and risk taking appetite :)