10 mutual funds to buy this Diwali which can grow your wealth

Updated: October 29, 2021 11:14 AM

Here is the list of top mutual funds that can not only help you reach your financial goals but can also help you build wealth.

You should look to diversify your portfolio across two or more funds (depending on desired sub-asset class exposure and investable corpus) to reduce conc-entration to the calls of a single fund manager.You should look to diversify your portfolio across two or more funds (depending on desired sub-asset class exposure and investable corpus) to reduce conc-entration to the calls of a single fund manager.

Diwali is not only a festival of light. It is also considered to be an auspicious festival to make investments. It is believed that investments made in Diwali multiply many folds. For those who believe slow and steady wins the race, mutual funds are excellent option for investments.

Mutual funds come in various shapes and sizes. You can invest in them according to your financial goals. Here is the list of mutual funds that can not only help you reach your financial goals but also help you build wealth.

1) Liquid Fund: If you are the one who loves to see your savings account grow, then Liquid Fund is for you. It is ideal for parking short-term money. It generates higher returns than a savings account. You can withdraw the funds at any time. If the opportunity arises, you can even shift your investments into equity. For example, Quant Liquid Fund has generated 4.69% returns in the two-year period and 5.57% returns in a five-year period. This is higher than a regular savings account.

2) Debt Fund: Whatever your investment preference, debt should be a part of your portfolio. It provides stability and cushion against volatility. For those who hold it for 3 years, their returns qualify as a long-term capital gain with indexation benefit. In this category Axis Dynamic Bond Fund has generated 4.22%, 8.62% and 9.78% returns in one, two and three years, respectively.

3) Aggressive Hybrid Funds: Hybrid funds, as the name suggests, invest in equity and debt. It is a perfect combination of safety and growth. More importantly, since it qualifies for equity taxation, it is ideal for new investors. Kotak Equity Hybrid Fund has delivered a phenomenal return of 50.40% in six months. It has delivered 22.24% and 13.69% in two years and three-year period, respectively.

4) Equity Savings Funds: Again a Hybrid Scheme, but more inclined towards debt. These funds generally invest in Equity, Debt and Arbitrage opportunities. Since these funds have low equity exposure, even senior citizens can consider these funds with a 1 or 2 years time horizon. Among these funds, SBI Equity Savings Fund boasts of solid risk-return profile. It has delivered 13.87%, 12.62%, and 8.86% in One, two and three years, respectively.

5) Large Cap Funds (Equities): If you want to invest in equity and want your money to grow steadily, these are your best bet. Large Cap Funds witness less volatility than their Midcap or Small Cap peers. These are your best bet for long term goals. One should consider Axis Bluechip Fund in Large Cap Space. It has delivered astounding returns of 51.90% in six-month period. Its long term returns profile is impressive too, with 24.48%, 24.98%, 19.08% returns in two, three and five years, respectively, it has made investors happy despite the sharp fall seen in 2020.

6) Mid Cap Funds (Equities): These are a bit riskier than their Large Cap peers but have the potential to deliver above-average returns. These funds invest in growth companies whose potential is untapped. If you want to invest in funding your child’s education or paying the down-payment for a house, then these funds are your best bet. Let’s take the PGIM India Midcap Opportunities Fund. It has made short term investors richer by delivering 95.29% returns in one year. Even if we consider a 5-year horizon, this fund has been silently continued to perform.

7) Small Cap Funds: If taking risks is your style, then look no further. These funds are highly volatile and can deliver extraordinary returns in the long run. These are not for the faint-hearted and hence investors must have very limited exposure to these funds. Even if you love taking a risk, invest in these funds only if you have a long term time horizon. Quant Small Cap Fund has proved that small is beautiful. It has delivered 124.15% returns in one-year period. Even in five-year period, it has delivered 23.17%.

8) Equity Multi-Cap Funds: If you want the flavour of Largecap, Midcap and Smallcap, then Multi-cap funds are your best bet. Consider this, a Midcap fund might be forced to invest in Midcap stocks even if the market is not performing well. Multi-cap funds have more flexibility here. These funds are long term wealth creators. BNP Paribas Multi Cap Fund hogs the limelight with its stellar performance. It has delivered a mind-boggling 70.82% return in one year period. But it is not the short term performance alone. Even in a two, three and five year period, the fund has delivered 29.83%, 23.68% and 16.24%, respectively.

9) International Funds: If you have always wanted to own blue-chip stocks like Amazon, Facebook, Netflix or Apple, but couldn’t because of geographical hurdles, then International funds are for you. Not only do they offer portfolio diversification, but also shield from local volatility. ICICI PRU US Blue Chip Equity Fund offers the window to the world. It has clocked impressive performance of 20.09% over the period of five years.

10) ELSS Funds: A must in your portfolio. These funds are ideal for availing benefits under Section 80C of the Income Tax Act 1961. They have the lowest lock-in period in tax saving instruments. In the long term, they can deliver above-average returns. One can consider Canara Robeco Equity Taxsaver Fund. Besides tax saving, it has delivered handsome gains for investors. It has delivered 61.69% in one year period. Since these funds have a lock-in period of three years, for those who are sceptical, the fund has delivered 28.27% return in a three-year period.

The Mutual Fund universe is vast. It is, therefore, always advisable to seek the guidance of a qualified financial planner before making investment decisions.

(By Abhinav Angirish, Founder, Investonline.in)
 
Disclaimer: These are the author’s personal views. Readers are advised to consult their financial planner before making any investment.

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