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"The Jambhavan Diaries"

High Performing Equity Mutual Funds. Do you own them?

"Mutual Fund investments are subjected to market risks. Please read all scheme related documents carefully before investing."

I am mentioning the statement above for a reason. These days, most of the new investors are getting lured by high returns given by different mutual funds. Due to which, they dump their hard earned money into various mutual fund schemes without understanding the underlying philosophy of investing. As a matter of fact, some make money, and there are some who lose a lot of money. It is of paramount importance to understand what is right for you before choosing a decision, especially when it comes to your money. Importantly, investing is an activity that should have a long-term horizon which involves careful planning, sound knowledge, patience, conviction, and ethics. If you violate any of the above characteristics, you are speculating and not investing. In other words, you are gambling. I hope you have a pleasant time reading this post.  - Saravanan B

In the past couple of weeks, I have received numerous queries about the performance of different equity mutual fund schemes. I was asked by some people to come up with a blog post to highlight the various types of mutual fund schemes and best-performing schemes in the past. Here it goes. 

Equity Mutual Funds fall under the following categories:

  1. Large Cap Funds - This fund invests its money in companies with Market capitalisation over and above Rs. 75,000 Crores. For example, companies like Maruthi Suzuki, L&T, etc. 
  2. Mid Cap Funds - This fund invests its money in companies with Market capitalisation between Rs. 5000 Cr - Rs. 75,000 Crores. For example, companies like Nestle, Ashok Leyland, etc. 
  3. Small Cap Funds - This fund invests its money in companies with Market capitalisation below Rs. 5000 Cr. For example, companies like Manapurram Finance, IndusInd Bank and other similar small cap companies, etc.
  4. Diversified Equity Funds - This fund invests its money in a mixture of small-cap, mid-cap, and large-cap companies.
  5. Equity Linked Savings Scheme (ELSS) - These funds help an individual to get a tax exemption of up to Rs. 1,50,000 /- per year under section 80 c of IT act. It comes with a lock-in period of 3 years. 
  6. Balanced Funds - These funds allocate its portfolio in sovereign government bonds, corporate bonds, and equities. It helps individuals in managing their overall risk.
  7. Sector Funds - (Eg. Pharma, FMCG, etc.) - This fund invests its money in companies belonging only to a particular area. For example, if you want to invest in businesses that belong only to Pharma sector, you can opt for sector mutual funds.
  8. Index Funds -  This fund invests its money in the companies of the underlying index. (Eg. Sensex, Nifty, etc. ) It tracks the overall market. If the market goes ups, your fund goes up and vice versa. Warren Buffett recommends individuals to opt for index funds. 

In this regard, a mutual fund scheme should be chosen based on several factors like your risk appetite, lifestyle, time horizon, etc.

A few of top performers in the past include: 

  1. Large Cap Funds: SBI Bluechip fund with a 5-year annualised return of 19.5%; ICICI Prudential Top 100 fund with a 5-year return of 16.5%.
  2. Small and Mid Cap Funds: DSP BR Microcap Fund with a five-year annualised return of 30.6%; LT Mid cap fund with a five-year annualised return of 26.7% 
  3. Diversified Equity Funds: Sundaram Rural India Fund with a five-year annualised return of  20.4%; Tata Equity PE Fund with a five-year annualised return of  21.6%
  4. ELSS: DSP BR Tax Saver Fund with a five-year annualised return of  20.8%; Birla Sun Life Tax Save plan with a five-year annualised return of  20.2%
  5. Balanced Funds: ICICI Prudential Balanced Fund with a five-year annualised return of  18.2%; HDFC Balanced Fund with a five-year annualised return of  17.5%
  6. Index Funds:  Reliance ETF Nifty Bees with a five-year annualised return of  12.3%; Kotak Nifty ETF Fund with a five-year annualised return of  13.5%

If you are planning to invest, please do not hesitate to drop an email to saravanan.b@bsaravanan.co.in. I will be happy to help you out.

Caution: Do not base your investment decisions only on returns. There are other important factors involved while choosing a scheme. 

Important Information / Disclaimer: Replicating the past performance may or may not be possible in the future. Please consult your financial advisor before investing in any of the mutual fund schemes. Small Cap and Mid Cap investments are perilous. It is my humble request to you all to not get lured by the extraordinary returns they offer. Before putting your hard earned money into these schemes, understand the in's and out's of the plans. If not, you are going to end up losing your money. The author of the blog will not take any responsibility for the losses incurred. The views expressed in this blog are of my own. 

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