10 cheapest equity funds with over 20% CAGR in 3 years

Looking beyond headline returns can make a big difference to long-term wealth creation. An analysis of over 500 active equity mutual funds shows that several low-cost funds not only kept expense ratios in check but also delivered over 20% CAGR returns over the last three years, highlighting how lower costs can significantly boost investors’ net gains.

Written by Mithilesh Jha

January 14, 2026 07:11 IST

10 Cheapest Equity Funds with 20%+ Returns in 3 Years

10 cheapest funds with 20%+ returns in 3 years (Image: AI generated)

When investing in equity mutual funds, most investors focus on returns—how much a fund has delivered over 1 year, 3 years, 5 years, and so on. But in this race, a key aspect is often overlooked – cost. Do you know that a fund with higher fees, even if it shows good returns, can silently reduce your actual earnings?

Data from the past three years shows that there are many equity funds that have delivered more than 20% CAGR returns while also having very low expense ratios. This means investors paid less and earned more.

What is the expense ratio and why is it so important?

The expense ratio is the fee that the fund house charges investors every year against fund management, administration and other expenses. This fee is deducted directly from your investment.

For example, if two funds are giving 20% returns, but one has an expense ratio of 2% and the other 0.5%, then in the long run, the fund with lower costs will benefit the investor much more. That is, a small difference can turn into a large sum over time.

What does the data say?

Here, we analysed more than 500 active equity funds based on their expense ratios and three-year returns, and shortlisted 10 funds with the lowest expense ratios that delivered over 20% CAGR during this period. These are all direct plans across equity subcategories.

10 cheapest equity funds that delivered 20%+ returns in 3 years

Mutual Fund Name	3-Year CAGR (%)	Expense Ratio (%)
ITI Mid Cap Fund	25.89	0.36
Kotak Mid Cap Fund	22.09	0.37
Edelweiss Mid Cap Fund	27.02	0.4
Invesco India Smallcap Fund	24.88	0.4
Mahindra Manulife Focused Fund	20.83	0.4
Mahindra Manulife Multi Cap Fund	21.67	0.4
Edelweiss Large & Mid Cap Fund	20.31	0.41
Edelweiss Small Cap Fund	20.6	0.42
ITI Multi Cap Fund	20.98	0.42
ITI Small Cap Fund	26.1	0.42

(Data: Amfi, Value Research)

What do these funds have in common?

Looking at the performance of these funds, some clear patterns emerge:

All funds have an expense ratio significantly lower than 0.5%.

They perform relatively better even during market downturns.

What’s the takeaway for investors?

Choosing a low-cost fund can be beneficial, but investment decisions shouldn’t be based solely on this factor.

Before investing, it’s crucial to consider the following:

Look at the long-term track record, not just the last three years.

Understand the fund’s risk level and investment strategy.

Don’t rely on a single fund; diversify your portfolio.

For investors investing through SIPs (Systematic Investment Plans), funds with low expense ratios can be particularly beneficial in the long run.

A short example:

Let’s say an investor started a Rs 10,000 SIP three years ago. If they chose a fund with a low expense ratio and a CAGR of over 20%, their investment today would be worth significantly more than an investment in a fund with higher fees—even if both funds showed the same gross return.