Stellar returns by consumption funds in the last year- Should you invest?

Consumption funds give more than 20% returns in the last one year.

Consumption funds in India

Consumption funds are attracting more funds from investors. The inflation is cooling down, and future rate hikes look less aggressive. As per the analysts, consumption funds might be a good bet for investors. This means that the consumption funds can continue to give good returns in short to medium term. 

Indian WPI inflation was at 13.93% in July. Vegetables, milk, fuel, etc., became cheaper. The inflation was down from a high of 16.63% in May this year. This is positive news for consumption funds betting on this sector. Consumption funds consist of defensive sectors like FMCG, pharma, healthcare etc. Consumption funds are less risky to market fluctuations. 

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Top consumption funds in India

The investors should choose those consumption funds that have consistent returns. Consistency of returns is more important than one year returns when you invest your money for the long term. The top consumption funds in India are:-

Top consumption funds in India

As can be seen in the table above, the returns of consumption funds are pretty high consistently. The returns in the last one year are as high as 27.65% for the SBI Consumption Opportunities Fund. In the last 5 years, the best returns have been given by Nippon India Consumption Fund (15.88%). The returns are pretty good for the consumption funds as the Indian economy is growing and the middle class is rising.

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What should you do?

The Indian economy is progressing fast, and the middle class is rising. In such an economic scenario, consumption stocks should do well. The returns of the consumption funds in the past 5 years have been very good, and the return has been consistent. This means that if you are a long-term investor, you can invest in consumption funds to get consistent returns in the long term.

The returns in the last one year have been good for many consumption-oriented mutual funds. But one should consider the risk factors as well. The risk factors are that investing in a thematic fund is riskier than investing in multicap diversified funds. Diversified funds ensure that you are invested across sectors, and your returns are not marred by the poor performance of a particular sector. Also, multicap funds ensure that you are invested across different market capitalization stocks as per the analysis of the fund manager.

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