Equity Mutual funds are one of the best investment option for long term. Over a long term, equity investments have given better returns than fixed deposit, gold etc. So as part of investment strategy, one should definitely consider some exposure to equity funds.
Based on your risk profile, you should allocate a portion of your investment amount into Equities. Mutual funds is the best route for retail investors to invest in Equities.
Options to select
When you have decided to invest through mutual funds, you should consider selecting following options:
- Direct option – If you are investing directly, you should select DIRECT option. You save distribution commission as the mutual fund company is not paying any commission on such mutual funds and those benefits are passed on to the investors. Normally the returns of DIRECT funds are approx 1% higher than normal funds.
- Growth option – In this option the earnings are getting accumulated and helps to build corpus over long term. The other options are Dividend and Dividend re-investment
- SIP mode – This is an option to invest systematically on a periodic basis (e.g. monthly). So rather than making one time investment, you should consider investing via SIP mode. This helps to average the cost price and risk.
Categories of Mutual Funds
There are various categories of Equity funds and you should select one / combination based on your risk profile, time horizon etc. Different type of funds available are:
Which Mutual funds should I select?
It depends on your investment objective, time frame and risk apettite. Depending on your situation, you need to create an optimal combination for yourself. You should consult your financial advisor.
Following is just an example of how you can allocate your investment in different funds based on your risk appetite.
- Aggresive Investor: 50% in Small Cap, rest 50% in Large, Mid and Multicap
- Moderate investor: 25% in Small Cap, 25% in Large cap, 50% in Midcap and Multiap
- Passive Investor: 50% in Large Cap, 25% in Midcap, 25% in Multicap
Mutual Fund Performance (Historic and Year-on-Year)
In this post, I have shared various performance parameters for best mutual funds:
- the historic performance of some of the best performing funds
- historic returns in SIP mode.
- the year-on-year returns
Based on the historic performance, please see below the list of Best performing Equity Mutual Funds. You can consider these funds for your investment. However, please note that the past performance is not guaranteed for future performance, but it is good indicator of how the fund has performed in the past.
I have also shared the Year by year returns for these funds – You can see that the returns are volatile, so you should have long term view. So, if any year the returns are not good, you should not panic.
Top performing Large Cap Equity Funds
Large Cap Equity Funds are mutual funds that select stocks from the largest 100 stocks listed in the Indian markets (highest market capitalization). Larger stocks are expected to be less risky whereas smaller stocks may have higher potential to grow.
Top performing Large Cap Equity Funds:
- Axis BlueChip Fund
- Canara Robeco Bluechip Equity
- BNP Paribas Large Cap Fund – D (G)
- Mirae Asset Large Cap – D (G)
- JM Large Cap Fund – D (G)
Please check the Year-on-Year returns. This will help you to understand that returns from equity funds can be volatile
Top performing Large & Mid Cap Equity Funds
Large & Mid Cap Equity Funds select stocks from the largest 250 stocks listed in the Indian markets (highest market capitalisation).
Top performing Large & Mid Cap Equity Funds:
- Axis Growth Opportunities – D (G)
- Mirae Asset Emerging Bluechip Fund
- Tata Large & Mid Cap Fund – Regular Plan
- Can Robeco Emer-Equities-Direct (G)
- Invesco Growth Opportunities – D (G)
Top performing Mid Cap Equity Funds
Mid Cap Equity Funds select stocks from the mid cap category – stocks ranked between 100 to 250 by size ( market capitalisation).
Top performing Mid Cap Equity Funds:
- Axis Mid Cap – D (G)
- Invesco India Midcap – D (G)
- DSP Midcap Fund
- Mirae Asset Midcap Fund
- Tata Midcap
- BNP Paribas Mid Cap
Top performing Small Cap Equity Funds
These mutual funds select stocks for investment from the small cap category, which includes all stocks except largest 250 stocks (by market capitalisation).
Top Performing Small Cap Mutual Funds:
- Axis Small Cap
- SBI Small Cap
- Kotak Small Cap
- DSP Small Cap
- L&T Emerging Businesses Fund
- Franklin India Smaller Companies Fund
- Tata Small Cap
Top performing MultiCap Equity Funds
These mutual funds primarily invest in stocks selected from all the listed stocks in the Indian market (NSE/BSE).
Top Performing Multi Cap Mutual Funds:
- Axis Multi Cap
- Canara Robecco Equity Diversified
- DSP Equity Fund
- JM Multicap
- Kotak Standard Multicap
Top performing ELSS (Tax Saving) Equity Funds
Top performing Sector / Thematic Equity Funds
These mutual funds creates a portfolio which mimics given index. So these funds are expected give similar returns as per index. Best Performing Equity Thematic or Sector Funds
- Best Performing International Funds (funds that invest overseas market e.g. international stocks like Google, Apple etc)
Top performing Index Equity Funds
These mutual funds creates a portfolio which mimics given index. So these funds are expected give similar returns as per index.
Top Performing Index Equity Mutual Funds:
- UTI Nifty Iundex Fund
- Tata Index Fund
- HDFC Index Fund
- SBI NIFTY Index
Other Type of Equity Funds
If you are general retail investor, the above type of mutual funds should be sufficient for you. If you have already allocated funds for above fund,s you may consider these specialist funds.
- Value Oriented Equity funds: These mutual funds invest in stocks which are undervalued. The underlying assumption is, stocks may be undervalued due to temporary factors and will provide higher returns compared to peers once valuation is at par.
- Focussed Equity Fund: These mutual funds invest in stocks but restrict the number of stocks in the portfolio to a maximum of 30
- Dividend Yield Fund: These mutual funds invest in stocks and follow strategy of investing in stocks which generates higher dividend yield.
Following the new SEBI classification requirements issued in 2017, many mutual funds have changed their name as well as mandate. Many funds have been merged as well. So, the past performance may not be representative of the new mandate.
- Don’t just invest in a fund if they have performed better in last year. Select the mutual funds based on your objective, time horizon, risk apettite and funds performance.
- Review your portfolio atleast once in 6 months.
- If you are investing in Equity funds, be prepare for volatile returns. So you should be investing for long term (5-7 years minimum).
- Read – New Central KYC process must for new Mutual Fund Investors.
- Best Performing Arbitrage funds ( almost risk free and can be used as alternative to Fixed Deposits)
- Best Performing Balanced funds (funds that invest both in Equities and Debt)
- Best Performing Debt funds
- Best Performing Gold Funds or Gold ETF