Mutual funds are a proven way to grow wealth. They are safe investments because not only they spread risk effectively but also provide attractive returns. As indices rise, mutual funds can create great returns for investors over the long term. Over the past 12 years, the Sensex has risen by more than 10,000 points and generated considerable wealth for investors.
Equity markets were turbulent in 2019. The consensus is that the Indian economy is amidst an economic slowdown. Regardless, during the past few weeks, stock indices touched new highs. And mutual funds are on target to provide attractive returns in 2020. In mid-2019, mutual funds had Rs 25.5 lakh crores of Assets Under Management (AUM). Of these assets, Rs 13.22 lakh was invested in debt, Rs 7.16 lakh in equity, and Rs 3.28 lakh in hybrid schemes.
Investing in mutual funds is a wise way to grow wealth. However, selecting the right mutual fund to invest in can prove challenging. There are thousands of mutual fund schemes in the market. While this signals there is healthy confidence in the country’s browsers, it leaves investors with an abundance of options where making the right choice is difficult. Mutual funds provide healthy returns, but selecting the right fund is a function of investors’ time preferences and risk appetite.
Simply put, every search on Google with the word “best” may offer you a list to show but not the conviction to follow it up with real investments. From among the thousands of mutual funds to invest in, based on your investment horizon, objective and risk profile, a few really stand out. The funds’ name and what makes them exceptional is enumerated below:
1. UTI Nifty Index Fund
The UTI Nifty Index Fund is a large-cap fund which was launched in 2000. Since its launch, it has generated an average rate of return of 11% per annum. Its average rate of return over three years, five years, and ten years is 15%, 8%, and 9%, respectively. The UTI Nifty Index Fund is attractive because most large-cap funds have failed to outperform benchmark indices. The re-categorization of rules by SEBI has played a part in them not outperforming. Because the UTI Nifty Index Fund is a passive fund that tracks indices, investing in it will generate higher returns than investing in most actively managed large-cap funds.
The fund tracks the Nifty 50, and currently, its AUMs are Rs 1,793.60 crore (as on December 2019). The fund’s NAV ranged between Rs 68 to a little more than Rs 79 over the past year (growth option). Its returns have exceeded its benchmark by 12.17%. A lumpsum investment of Rs 5,000 is sufficient for investing in this fund.
2. Axis Blue Chip Fund
The Axis Blue Chip fund is an attractive large-cap fund. It has generated average annual returns of 12% since its inception in 2010. Its average rate of return over one year, three years, and five years is a phenomenal 17.93%, 19.53%, and 9.91%, respectively. Its AUMs are Rs 8,749.21 crore (as on December 2019). The fund’s NAV ranged between Rs 26 to a little less than Rs 32 over the past year (growth option) . Its returns have exceeded its benchmark by 17.93%. Like the UTI Nifty Index Fund, the minimum lumpsum investment in this fund is Rs 5,000.
3. Mirae Asset Large Cap Fund
Launched in 2008, this one is benchmarked against the S&P BSE 200. It has generated average annual returns of 15.6% since its inception. Its average rate of return over one year, three years, and five years is 12.28%, 15.85%, and 11.37%, respectively. The fund’s AUMs are Rs 15,896.69 crore (as on December 2019). Over the past year, the NAV ranged between Rs 46 to Rs 55 (growth option). Its returns exceeded its benchmark by 3.29%. The minimum lumpsum investment that can be made in this fund is Rs 5,000.
4. Kotak Standard Multi Cap Fund (Multi-Cap Fund)
The Kotak Standard Multi Cap Fund was launched in 2009. This is a multicap fund and hence provides the fund manager the freedom to invest purely on merit and potential of a company without the consideration for market cap, though the fund usually invests in the top 200 companies on the exchange. The fund has delivered an average annual return of 13.73%. The average annual return over the past one, three and five years is 13.17% 6.17% and 10.93% respectively. The fund AUM has grown to Rs 28,348 crore as on Oct 2019. It has 90.28% investment in equities of which 64.71% is in large cap stocks, 17.34% is in mid cap stocks, 1.72% in small cap stocks. The fund’s NAV ranged between Rs 31.86 to Rs 37.46 over the past year (growth option). It has outperformed its benchmark by about 3% over the past year. The minimum lumpsum investment in the fund is Rs 5,000.
5. SBI Banking and Financial Services Fund (Thematic Fund)
SBI Banking and Financial Services Fund was launched in 2015. This is a thematic fund primarily investing in stocks of banks and other financial institutions. We are positive on the financial sector due to improving asset quality, recovery of funds through the IBC process and the sector being one of the major beneficiaries of the corporate tax cut. The fund has delivered an average annual return of 15.53%. The average annual return over the past one and three years has been 24.15% and 21.22%, respectively. The total fund AUM as on October 2019 was about Rs 1,200 crore. The fund’s NAV traded between Rs 15.65 and Rs 19.90 (growth option -regular plan).
(By Jashan Arora, Director, Master Capital Services Ltd)
Disclaimer: The mutual funds mentioned herein have been recommended by Master Capital Services Ltd. Readers are advised to consult their financial planner before making any investment.