If we had a rupee for every time we’ve been asked this, we’d probably have… well, ₹ 10 lakh. “What’s the best mutual fund to invest in right now?” is one of the most common — yet misdirected — questions investors ask, whether through email, social media, or at investor meets. A best mutual fund for someone can be a disaster investment option for you. Hence one should invest based on what works good for them and not to someone else. So, if you are looking to invest ₹ 10 Lakhs in 2025, let’s break down the ideal mutual fund options based on different time frames. This ensures that your money works best for you according to your specific needs.
The Myth of “Best”
When someone asks for the best mutual fund, they often mean: “Which fund will give me the highest return — safely, quickly and preferably without dropping even a rupee?” Unfortunately, that’s not how investments work.
Instead of chasing the mythical “best” mutual fund, you need to align your investment with your financial goals, investment horizon, and risk appetite. The best mutual fund for one person may turn out to be the worst for another. For instance, a retiree looking for capital preservation should not invest in smallcap funds meant for high growth and high volatility. Instead they can go for debt mutual funds / Other Fixed Income Options Options Suitable to Senior Citizens can be considered.
What are Mutual Funds and Why Should You Invest in Them?
Mutual funds are investment vehicles that pool money from multiple investors and invest in equities, bonds, or other assets, managed by professional fund managers. The benefits include diversification, professional management, liquidity, and access to a range of asset classes.
Investing in mutual funds can help you achieve various financial goals such as buying a house, children’s education, retirement planning, or even creating emergency funds. Whether you are a conservative investor or someone who can take high risks for high returns, there’s a mutual fund out there for you.
Best Mutual Funds to Invest ₹ 10 Lakhs in 2025 – Based on Time Horizon
Let’s categorize the best mutual funds to invest ₹ 10 Lakhs in 2025 based on your investment tenure. This approach helps align your goals with the right fund type.
Let me showing you through infographic and then get into details.
Best Mutual Funds for Less than 1 Year
If your investment horizon is less than one year, your primary focus should be on capital protection and liquidity. You’re not aiming for high returns here, just safe parking of your funds.
Ideal Fund Categories:
- Liquid Funds – These invest in short-term money market instruments with maturities up to 91 days. Ideal for parking surplus funds.
- Ultra Short Duration Funds – Slightly longer maturity than liquid funds, offering marginally better returns while still maintaining low risk.
Why They Work:
- Low interest rate risk
- High liquidity (can be redeemed in 1–2 business days)
- Returns better than savings accounts or fixed deposits
Expected Returns: 6% to 7.5% annually
Risks: Minimal credit risk; negligible interest rate risk
Some sample mutual fund recommendations given below:
- Liquid Funds: One can go for any liquid funds as it may not make much difference.
- USTF: Nippon Ultra Short Term Fund or Mirae Asset Ultra Short Term Fund
Best Mutual Funds for 1 to 3 Years
This is still a relatively short period, so your investments should balance safety and returns.
Ideal Fund Categories:
- Short Duration Funds – These invest in instruments with maturities of 1–3 years, offering higher returns than liquid funds with slightly higher risk.
Why They Work:
- Better suited for short-term goals like a vacation or buying a bike/car
- Reasonable return potential with moderate risk
Expected Returns: 7% to 8% annually
Risks: Moderate interest rate risk; minimal credit risk if you choose high-quality funds.
Some sample mutual fund recommendations given below:
- Nippon India Short Term Fund or Axis Short Duration Fund
Best Mutual Funds for 3 to 5 Years
If you have 3–5 years, you can start taking slightly higher risks for better returns.
Ideal Fund Categories:
- Medium Duration Funds – Good mix of returns and stability
- Conservative Hybrid Funds – Mix of debt and equity (typically 75–90% debt, rest in equities)
- Equity Savings Funds – Use arbitrage, debt, and equity to reduce risk
Why They Work:
- Suitable for medium-term goals like children’s school fees, down payment for a house
- Balanced risk-return profile
Expected Returns: 7% to 9% annually
Risks: Interest rate risk in medium duration funds; minor equity risk in hybrid and equity savings funds
Some sample mutual fund recommendations given below.
- Medium Duration Funds: ABSL Medium Term Plan Fund or Kotak Medium Term Plan Fund
- Conservative Hybrid Funds: UTI Conservative Hybrid Fund or Parag Parikh Conservative Hybrid Fund
Best Mutual Funds for 5 to 7 Years
Here you can consider equity as the core of your investment strategy.
Ideal Fund Categories:
- Largecap Mutual Funds – Invest in top 100 companies by market cap
- Flexicap Mutual Funds – Dynamic allocation across large, mid, and smallcap stocks
Why They Work:
- Good for medium to long-term goals like buying a second home, or building a retirement corpus
- Diversified exposure to India’s growth story
Expected Returns: 10% to 12% annually
Risks: Market volatility; choose funds with consistent track records
Some sample mutual fund recommendations here:
Best Mutual Funds for Over 7 Years
This is where compounding truly works its magic. If you can hold for over 7 years, you can afford to take higher risks.
Ideal Fund Categories:
- Largecap and Flexicap Funds – For stable, long-term growth
- Midcap or Smallcap Funds – For aggressive investors willing to take more risk for higher returns
- Global Funds – High risk investors who want to take risk for high returns.
Why They Work:
- Long-term equity investments historically outperform most other asset classes
- Suitable for long-term goals like retirement, child’s higher education, wealth creation
Expected Returns: 12% to 15% annually (higher for mid/smallcap funds)
Risks: High volatility in mid/smallcap funds; be prepared for ups and downs
Sample mutual fund portfolio provided below:
- Nippon India Largecap Fund
- Motilal Oswal Midcap Fund
- Nippon India Smallcap Fund
- Parag Parikh Flexicap Fund
- Motilal Oswal Nasdaq 100 Fund of Fund
Investors can also check some of the high growth Midcap Mutual Funds for 2025 to explore further from midcap segment.
Conclusion
There is no single “best mutual fund” that fits all investors. What matters more is aligning your ₹ 10 lakh investment with your financial goals, risk profile, and time horizon. Always diversify your investments instead of putting everything into one category or fund. Also, regularly review and rebalance your portfolio to stay on track.
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