When selecting a mutual fund, there are various parameters one can consider, keeping in mind the type of fund and the investment goal. In this context, some of the key factors include good ratings, a low expense ratio and strong returns. In this write-up, we will look at funds that are top-rated by Value Research, have a low expense ratio and have also delivered excellent 3-year returns.
These equity mutual funds have their expense ratio in the lowest category – ranging from 0.39% to 0.56%. In terms of returns on investment, they have delivered more than 30% compound annual growth rate (CAGR) over the last three years.
Why ratings and expenses are important?
Fund rating and expense ratio are considered two important indicators for new investors. Fund ratings indicate how the fund has performed in its category over the past few years, while expense ratios indicate how much fees an investor will have to pay to invest in that fund. A low expense ratio has a direct impact on the investor’s net return. That is, if two funds are giving similar returns, but one has a higher expense, then the fund with lower expenses will give more benefit to the investor.
These top 5 funds have delivered strong performance across both short- and long-term timeframes. They span categories ranging from mid-cap and small-cap to thematic funds. However, here we will mainly focus on their 3-year returns (direct plan).
1. Bandhan Small Cap Fund
The small-cap fund is an open-ended equity scheme from Bandhan Mutual Fund with assets under management (AUM) of Rs 12,982 crore as of June 30, 2025. It tracks the BSE 250 SmallCap TRI as its benchmark and carries a “Very High” risk rating, making it more suitable for aggressive investors with a long-term investment horizon.
One of its key highlights is its low expense ratio of just 0.39%, helping investors retain more of their returns over time.
Bandhan Small Cap Fund has delivered a 33.74% CAGR over the last 3 years.
A lump sum investment of Rs 1 lakh in this top-rated fund 3 years ago would be worth now Rs 2.40 lakh.
2. Edelweiss Mid Cap Fund
Edelweiss Mid Cap Fund is benchmarked against the NIFTY Midcap 150 TRI and is classified under the “Very High” risk category. As of June 30, 2025, the fund manages assets worth Rs 10,988 crore.
With a strategy centered on quality mid-cap companies, the top-rated fund seeks to deliver strong capital appreciation while maintaining a well-diversified portfolio across sectors. Its expense ratio is 0.39%, which can be considered quite low for an actively managed fund in India.
The mid-cap fund has given a 27.55% CAGR over 3 years, turning an investment of Rs 1 lakh to Rs 2.07 lakh.
3. Invesco India Smallcap Fund
This open-ended equity scheme from Invesco Mutual Fund focuses on investing in small-cap companies. It tracks the BSE 250 SmallCap TRI as its benchmark and is suited for investors with a long-term investment outlook and a high risk appetite. It is classified under “Very High” risk category. As of June 30, 2025, the fund manages assets worth Rs 7,425 crore. With a competitive expense ratio of 0.44%, the fund aims to deliver superior returns.
Invesco India Smallcap Fund has delivered an impressive return of 28.86% CAGR over the last three years.
The small-cap fund would have turned a lump sum investment of Rs 1 lakh into Rs 2.14 lakh in 3 years.
4. Nippon India Consumption Fund
Nippon India Consumption Fund is benchmarked against the NIFTY India Consumption TRI. The fund invests primarily in sectors such as FMCG, retail, automobiles, and consumer durables.
With a “Very High” risk rating, the fund is best suited for investors with a high risk tolerance. As of June 30, 2025, it manages assets worth Rs 2,640 crore and carries an expense ratio of 0.55%.
The top-rated fund’s 3 year CAGR stands at 19.07%. A lump sum investment of Rs 1 lakh in this fund would have become Rs 1.68 lakh.
5. Bandhan Large & Mid Cap Fund
Bandhan Large & Mid Cap Fund is an open-ended equity scheme from Bandhan Mutual Fund. The fund invests in a balanced mix of large-cap and mid-cap stocks, offering a blend of stability and growth.
The fund is benchmarked against the NIFTY Large Midcap 250 TRI and is classified as “Very High” risk. With assets under management of Rs 9,735 crore as of June 30, 2025, and an expense ratio of 0.56%, the fund aims to capture opportunities across market segments while maintaining cost efficiency.
The fund has given a CAGR return of 26.44% over the last 3 years. A lump sum investment of Rs 1 lakh made three years ago would be worth now Rs 2.02 lakh.
(Data: Value Research)
Should investors choose a fund only based on rating and expenses?
Experts advise that it is not wise to choose any fund only on the basis of rating and expenses. Investment decision should be made keeping in mind your investment goal, time frame and risk taking capacity.
Apart from this, the performance of the past years is not a guarantee of the future. Mutual funds are linked to the market and fluctuations in the market affect their returns.
What to do before investing?
These funds can be included in your research list, but before investing, also understand things like the fund’s portfolio, management strategy and sectoral allocation. If needed, take the help of a financial advisor.
Disclaimer:
This article is for informational and educational purposes only and is based on data sourced from publicly available platforms such as Value Research, AMFI, and fund house disclosures. The list of equity mutual funds has been prepared using parameters such as 5-star ratings, expense ratios, and past return performance. Historical returns, including the cited up to 140% absolute returns over three years, are based on past performance and should not be construed as an indicator or guarantee of future returns.
Mutual fund investments are subject to market risks, including volatility in equity markets, economic changes, and fund-specific risks such as portfolio concentration and sector exposure. Small-cap and mid-cap funds, in particular, fall under the “very high risk” category and may experience sharp fluctuations in the short term.
Expense ratio and ratings are important indicators but should not be the sole criteria for investment decisions. Investors are advised to evaluate schemes based on multiple factors including risk profile, investment horizon, asset allocation, and financial goals.
The information provided does not constitute investment advice, recommendation, or solicitation to buy or sell any financial product. Readers should consult certified financial advisors or refer to official scheme documents before making any investment decisions. The publication does not take responsibility for any financial losses or decisions taken based on this information.