- Date : 27/07/2022
- Read: 3 mins
If you had invested in the best performing mutual funds 20 years ago, you would be sitting on returns that have multiplied by 40-66 times.
Your investment returns depend on factors such as the amount invested, expected rate of return, and investment time horizon. When it comes to investing in equity funds, it is essential that you invest with a long time horizon. Compounding takes time to show benefits. Also, with a long investment time horizon, you can expect better returns from equity mutual fund investments.
Best long term mutual funds
Let us look at the best mutual funds to invest in for the long term. For example, let’s assume an investor had invested a lumpsum amount of Rs 1 lakh in each scheme. Here is what the 20-year returns of the top 10 mutual fund schemes would have looked like:
Also Read: Dummies Guide To Mutual Funds
Note: The above returns are for the period 5 July 2002 to 5 July 2022.
If we analyse the top three best equity funds:
- Nippon India Growth Fund has been managed as a mid-cap fund.
- Before its re-categorisation in 2018, SBI Magnum Global Fund was managed as a diversified equity mutual fund with a focus on mid- and small-cap stocks.
- Franklin India Prima Fund had a higher allocation to mid-cap stocks.
So, the top three performers focused on either mid-cap stocks or a combination of mid- and small-cap stocks. These stocks have a long runway for growth and hence have the potential to give higher returns than large-cap stocks, thereby creating wealth for investors.
Also Read: Mutual Funds Vs Shares - Which One To Choose?
Mutual fund investing: Start an SIP rather than a lumpsum investment
The above table lists the best mutual funds for a long-term investment with a lumpsum of Rs 1 lakh. However, an investor is recommended to go for a systematic investment plan (SIP) instead of a lumpsum investment. An SIP offers the benefit of Rupee Cost Averaging. When the markets are going down, you will accumulate a higher number of scheme units. And when the markets are going up, the value of your accumulated units will go up.
Also Read: SIP Insurance - Should You Consider It?
Long term mutual funds: The secret to wealth creation
We saw how equity mutual funds create wealth for you over a period of time. In the long run, mid-caps and small-caps have the potential to generate higher returns than large-caps. It is recommended that you start an SIP rather than make a lumpsum investment. To create wealth, you should ideally start a long-term SIP in a mid-cap or small-cap mutual fund scheme.
Your investment returns depend on factors such as the amount invested, expected rate of return, and investment time horizon. When it comes to investing in equity funds, it is essential that you invest with a long time horizon. Compounding takes time to show benefits. Also, with a long investment time horizon, you can expect better returns from equity mutual fund investments.
Best long term mutual funds
Let us look at the best mutual funds to invest in for the long term. For example, let’s assume an investor had invested a lumpsum amount of Rs 1 lakh in each scheme. Here is what the 20-year returns of the top 10 mutual fund schemes would have looked like:
Also Read: Dummies Guide To Mutual Funds
Note: The above returns are for the period 5 July 2002 to 5 July 2022.
If we analyse the top three best equity funds:
- Nippon India Growth Fund has been managed as a mid-cap fund.
- Before its re-categorisation in 2018, SBI Magnum Global Fund was managed as a diversified equity mutual fund with a focus on mid- and small-cap stocks.
- Franklin India Prima Fund had a higher allocation to mid-cap stocks.
So, the top three performers focused on either mid-cap stocks or a combination of mid- and small-cap stocks. These stocks have a long runway for growth and hence have the potential to give higher returns than large-cap stocks, thereby creating wealth for investors.
Also Read: Mutual Funds Vs Shares - Which One To Choose?
Mutual fund investing: Start an SIP rather than a lumpsum investment
The above table lists the best mutual funds for a long-term investment with a lumpsum of Rs 1 lakh. However, an investor is recommended to go for a systematic investment plan (SIP) instead of a lumpsum investment. An SIP offers the benefit of Rupee Cost Averaging. When the markets are going down, you will accumulate a higher number of scheme units. And when the markets are going up, the value of your accumulated units will go up.
Also Read: SIP Insurance - Should You Consider It?
Long term mutual funds: The secret to wealth creation
We saw how equity mutual funds create wealth for you over a period of time. In the long run, mid-caps and small-caps have the potential to generate higher returns than large-caps. It is recommended that you start an SIP rather than make a lumpsum investment. To create wealth, you should ideally start a long-term SIP in a mid-cap or small-cap mutual fund scheme.
