If you want better returns on your investments with relatively less risk compared to directly investing your money in the stock markets, then mutual funds may be a good option for you.
Despite being subject to market risks, mutual funds are fast emerging as one of the preferred investment options in India. If you want better returns on your investments with relatively less risk compared to directly investing your money in the stock markets, then mutual funds may be a good option for you. Some of the funds, if carefully chosen, even have the potential to double your wealth over the long term.
“This is, however, important to note that every single type of mutual fund category has a different ideal time horizon. And hence, when does your wealth double is a function of the same,” says Vikash Agarwal, CFA, Director and Co-founder, CAGRfunds.
However, for the sake of simplicity we are considering long term as anything above 6-7 years. With that in mind, the following are the best mutual funds across different fund categories:
Large Cap Equity Funds – Invest primarily in large cap stocks.
1. SBI Bluechip Fund: With an AUM (Asset Under Management) of approximately Rs 14,000 crore, this has been a flagship fund of SBI Mutual Fund. “This fund currently has over 75% exposure to large cap stocks with the flexibility to invest up to 20% in mid-cap stocks. While this fund was known for a patchy performance till 2011, it has beaten its benchmark by a substantial margin in the last 5 years,” says Agarwal.
2. Mirae Asset India Opportunities Fund: Launched in April 2008, this is a relatively smaller-sized fund with an AUM of around Rs 3,800 crore. With around 80% exposure to large cap stocks, this fund has given a 17% returns since launch and is known as one of the most consistent funds within the category.
Multi Cap Equity Funds – Have flexibility to modify their exposure to stocks across large, mid and small cap stocks
1. Kotak Select Focus Fund: Despite late entry into the category, Kotak Select Focus has consistently beaten its benchmark with a considerable margin ever since launch. This has resulted in a fast- paced growth and now it has an AUM of approximately Rs 11,000 crore.
2. Motilal Oswal MOSt Focused Multicap 35 Fund: The fund comes from a late entrant in the asset management industry, but as a management team they specialise in equity research. “With their strategy of taking concentrated bets with a long-term horizon, the fund has beaten its benchmark and category in the last 5 years. They have an AUM of around Rs 6700 crore and the fund is being managed by Gautam Sinha Roy,” informs Agarwal.
Balanced Funds – Have a minimum exposure of 65% to equity and the rest in debt instruments
1. ICICI Prudential Balanced Fund: One of the oldest in its category, this fund has grown to an AUM size of approximately Rs 12,600 crore. With a diversified exposure across various sectors, this fund has consistently beaten its benchmark.
2. SBI Magnum Balanced Fund: With a patchy performance till 2011, the fund has made a strong comeback since 2012. “The fund manager follows a carefully crafted strategy of maintaining a balance between equity and debt exposure. This has helped the fund stay ahead of its peers over the last 5 years,” says Agarwal.
Mid Cap Equity Funds – Invest primarily in mid cap stocks
1. Sundaram Mid Cap Fund: Launched in 2002, this fund is one of the best funds when looked at from a long-term perspective. The fund has outperformed the benchmark across market cycles. The fund manager S Krishna Kumar is an industry veteran and specialises in picking quality mid cap names.
2. Mirae Asset Emerging Bluechip Fund: Though this fund has a shorter track record (launched in 2010), it has been a consistent outperformer within the category ever since launch. The focus of the fund is to select quality stocks which are relatively larger in size.
Small Cap Equity Funds – Invest primarily in small cap stocks
1. Franklin India Smaller Companies Fund: Launched in 2006, this fund has grown to an AUM size of approximately Rs 5,600 crore. “The fund manager is selective about buying growth stocks at reasonable valuations with considerable focus on quality of management,” says Agarwal.
2. DSP BlackRock Micro Cap Fund: One of the favourites in the category, this fund has showcased phenomenal performance since launch. Temporarily suspended for any further inflows, the fund currently has an AUM of approximately Rs 5,800 crore.
(These mutual funds have been recommended by Vikash Agarwal, CFA, Director and Co-founder, CAGRfunds. Although due care has been exercised by them while selecting these funds, readers are advised to consult their financial adviser before investing in any of these funds.)