Slowly but steadily, market-linked uncertainties and the resultant fluctuations have begun to cast a gloomy shadow on different saving instruments. During such times, it is important for investors to find long-term, secure and sustainable modes of investment. Thus, it comes as no surprise that most people are now shifting towards safe and reliable havens like mutual funds.
However, choosing a specific mutual fund (MF) that can cater to all your needs, especially if you want to invest for a longer tenure, requires extreme diligence and caution. This is why you must select only those mutual funds which have continually performed well over the years and still harbour the potential of offering good returns.
Listed here are the top 10 mutual funds which can help you lower your risk profile and enhance your reward potential, if you invest in them for a period of 5 years:
Conceived as a major large-cap fund, the Aditya Birla Sun Life Frontline Equity Fund is essentially an open-ended instrument which has consistently provided returns ranging from 14% to 20% over a tenure of 7-10 years. This fund is primarily meant for investors who are seeking long-term capital growth and income generation possibilities. It requires a minimum investment of Rs 1,000, while the maximum investment can be up to any amount.
The Franklin India Prima Fund is a mid-cap, equity fund which has provided an overwhelming 21% returns in the past 10 years. It is fundamentally an open-ended growth scheme that focuses on the singular objective of capital accumulation and appreciation. In the 26 years since its inception, this fund has furnished one of the highest dividend distribution ratios. The minimum investment required to be a part of this fund is Rs 5,000.
Launched in 2005 as an open-ended, small cap fund, the Franklin India Smaller Companies Fund is, at its core, a highly diversified equity scheme. It invests its assets in small and mid-cap companies belonging to a multitude of sectors, which are likely to follow a high growth trajectory in the near future. Long-term capital growth has been identified as the fund’s basic objective. Its returns in the last 10 years have varied between 11% to 22%, thereby turning it into a cost-effective and tax-efficient mutual fund.
Previously named as Franklin India High Growth Companies Fund, the Franklin India Focused Equity Fund offers around 19% returns for a 9-10 year horizon. It is basically a diversified fund that invests in companies which have a potential for high growth. In the beginning, the fund requires a minimum investment of Rs 5,000. Most of its holdings are locked in banking, finance, telecom, and pharmaceutical companies.
As the name itself suggests, the DSP BR Tax Saver Fund is essentially a tax-saving scheme which requires a minimum investment of an amount as low as Rs 500. The scheme is primarily constituted of equity and other similar corporate securities, holding which can make an investor eligible for tax deductions under section 80C of the Income Tax Act, 1961. The fund’s objective is to generate capital appreciation by providing assured returns that range from 15% to 17% in the longer run.
Ranked as number 1 in the large-cap category, the Canara Robeco Blue-Chip Equity Fund is known for generating steady returns of approximately 12%-13% over a 10 year period. Predominantly, the fund invests in companies which have a large share of market capitalisation. These include organisations from engineering, technology, and banking sectors. 95% of the fund’s assets are allocated to equities which require a minimum investment of Rs. 5,000.
Considered to be one of the top three funds in the mid-cap category, the Axis mid-cap fund has provided yields of 15% to 20% in a tenure of the past 9-10 years. It basically invests in the equity instruments of companies in the finance, manufacturing, and automotive sectors. Introduced in 2011, the fund requires a minimum investment of Rs 5,000 and has an asset size of nearly Rs 1,500 crore. It has a small exit load of 1%, thereby helping investors significantly lower their risk profiles.
Offering returns as high as 27% in ten years, the Reliance Small Cap Direct Fund is a highly sought after financial instrument. Most of its holdings are allocated amongst a plethora of well-founded companies in the manufacturing, telecom, technology, and chemicals sectors. Like its counterparts, the fund requires a minimum investment of Rs 5,000 and aims at a goal of long-term capital appreciation. However, its investments include a portfolio of both, equity and debt instruments.
The Kotak standard multi-cap fund yields returns ranging from 15% to 18% over a period of 9-10 years. 91% of the fund’s assets are allocated to equity instruments whereas, the remaining are locked in debt securities. The fund has a diversified portfolio consisting of a wide array of sectors like oil & gas, banking, finance, and engineering. Within 10 years of its launch, the fund has been able to create an asset size of about Rs 15,000 crore. The minimum investment amount for this fund too is Rs. 5,000.
Conceived as open-ended, growth fund in 2008, the IDFC tax advantage (ELSS) fund invests in equities and aims at providing steady returns of about 16% in the longer run. Being an equity linked saving scheme, the fund has a minimum investment of Rs 500 and makes an investor eligible to claim tax benefits under Section 80C. The assets of the fund are broadly allocated between sectors as varied as finance, real estate, retail, and food & beverage.
Owing to the benefits of professional management and diversification which mutual funds provide in full measure, most of the aforementioned funds are competent enough to generate income and hedge profits. In an era where rising inflation and economic upheavals are a norm, these mutual funds and their financial safety blanket is indeed a vibrant exception.
(By Vijay Kuppa, Co-Founder, Orowealth)
(Disclaimer: These recommendations have been made by the author. Readers are advised to consult their financial adviser before investing in any of these mutual funds.)