- Date : 22/06/2022
- Read: 4 mins
Top performing mutual fund schemes that have delivered over 20% returns in 5 years.
Some investors prefer to take concentration risk and invest in sectoral or thematic funds, while others prefer to spread the risk by investing in diversified mutual fund schemes. What is your style of investing? Whether you invest in sectoral or diversified funds, you can generate wealth if you invest in the right mutual fund schemes. This article focuses on mutual fund schemes that have delivered 20% CAGR or higher returns in the last five years.
Pillars of compounding: The rate of return plays an important role
The compounding process has three important pillars to it:
- Invested amount: The general rule is that the higher the invested amount, the higher the final amount you will accumulate, other things being constant.
- Time horizon: The general rule is that the longer the investment period, the higher the final amount you will accumulate, other things being constant.
- Rate of return: The general rule is that the higher the rate of return, the higher the final amount you will accumulate, other things being constant.
Also Read: Give Yourself The Magic Of Compounding
We will focus on how the rate of return plays an important role in the compounding process. The financial product chosen for investment influences the rate of return. The investor's risk profile, in turn, influences the choice of the financial product. So, here’s an example to understand how the rate of return influences the final amount one will accumulate.
Let us assume Leena, Anita, Dimple, and Gita start a monthly SIP of Rs 25,000 towards their financial goals. Leena has a very aggressive risk profile, so she invests in a sectoral mutual fund. Anita have an aggressive risk profile, so she invests in a diversified equity fund. Dimple has a moderate risk profile, so she invests in a hybrid mutual fund. Gita has a conservative risk profile, so she invests in a debt mutual fund.
The following table shows how much they will accumulate in five years, assuming a certain expected rate of return based on their risk profile and the mutual fund scheme chosen for investment.
As evident from the table, Anita’s mutual fund investments have given much better returns than Dimple's and Gita's, though the monthly invested amount and tenure are the same. So, in the long run, the rate of return can make a big difference in the amount you accumulate.
Also Read: Investing And The Power Of Compounding
Equity mutual funds can create wealth for you
After seeing the above table, you must be wondering which schemes have historically given the best mutual fund returns. Let us look at the best performing mutual funds across categories in the last five years and amount accumulated with monthly SIP of Rs 25,000.
Mutual fund returns: Five-year returns for direct schemes
Note: The above returns are as of 10 June 2022. The returns are for mutual funds with a direct investment option.The five-year returns are CAGR. The schemes have been ranked based on five-year mutual fund performance. The expense ratio has been sourced from the Moneycontrol website.
Mutual fund returns: Five-year returns for regular schemes
Note: The above returns are as of 10 June 2022. The returns are for mutual funds with a regular investment option. The five-year returns are CAGR. The schemes have been ranked based on earlier table ranking. The expense ratio has been sourced from the Moneycontrol website.
Also Read: Get 1 Crore By Investing In PPF Wisely
Best performing mutual fund schemes in the last five years
The above table shows a mix of sectoral and diversified equity mutual funds that have delivered the best returns in the last five years. The sectoral funds include IT mutual fund schemes and one infrastructure mutual fund scheme that gave one of the best returns in the last five years.
Among the diversified equity mutual fund schemes, three small-cap mutual fund schemes and one mid-cap mutual fund scheme were among the top performers. The top performers include one Equity Linked Savings Scheme (ELSS) and a multi-cap mutual fund scheme.
Asset allocation: Key to earning good returns
Ideally, an investor should take a core-and-satellite portfolio approach towards equity mutual fund investments. The core portfolio can form 75%-80% of the overall equity portfolio, with investments spread across diversified (market capitalisation) equity mutual funds such as large, mid, and small cap schemes. The satellite portfolio can form the remaining 20%-25% of the overall equity portfolio, with investments spread across sectoral and thematic mutual funds. It is recommended to take the mutual fund SIP route while investing in these schemes.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.
Some investors prefer to take concentration risk and invest in sectoral or thematic funds, while others prefer to spread the risk by investing in diversified mutual fund schemes. What is your style of investing? Whether you invest in sectoral or diversified funds, you can generate wealth if you invest in the right mutual fund schemes. This article focuses on mutual fund schemes that have delivered 20% CAGR or higher returns in the last five years.
Pillars of compounding: The rate of return plays an important role
The compounding process has three important pillars to it:
- Invested amount: The general rule is that the higher the invested amount, the higher the final amount you will accumulate, other things being constant.
- Time horizon: The general rule is that the longer the investment period, the higher the final amount you will accumulate, other things being constant.
- Rate of return: The general rule is that the higher the rate of return, the higher the final amount you will accumulate, other things being constant.
Also Read: Give Yourself The Magic Of Compounding
We will focus on how the rate of return plays an important role in the compounding process. The financial product chosen for investment influences the rate of return. The investor's risk profile, in turn, influences the choice of the financial product. So, here’s an example to understand how the rate of return influences the final amount one will accumulate.
Let us assume Leena, Anita, Dimple, and Gita start a monthly SIP of Rs 25,000 towards their financial goals. Leena has a very aggressive risk profile, so she invests in a sectoral mutual fund. Anita have an aggressive risk profile, so she invests in a diversified equity fund. Dimple has a moderate risk profile, so she invests in a hybrid mutual fund. Gita has a conservative risk profile, so she invests in a debt mutual fund.
The following table shows how much they will accumulate in five years, assuming a certain expected rate of return based on their risk profile and the mutual fund scheme chosen for investment.
As evident from the table, Anita’s mutual fund investments have given much better returns than Dimple's and Gita's, though the monthly invested amount and tenure are the same. So, in the long run, the rate of return can make a big difference in the amount you accumulate.
Also Read: Investing And The Power Of Compounding
Equity mutual funds can create wealth for you
After seeing the above table, you must be wondering which schemes have historically given the best mutual fund returns. Let us look at the best performing mutual funds across categories in the last five years and amount accumulated with monthly SIP of Rs 25,000.
Mutual fund returns: Five-year returns for direct schemes
Note: The above returns are as of 10 June 2022. The returns are for mutual funds with a direct investment option.The five-year returns are CAGR. The schemes have been ranked based on five-year mutual fund performance. The expense ratio has been sourced from the Moneycontrol website.
Mutual fund returns: Five-year returns for regular schemes
Note: The above returns are as of 10 June 2022. The returns are for mutual funds with a regular investment option. The five-year returns are CAGR. The schemes have been ranked based on earlier table ranking. The expense ratio has been sourced from the Moneycontrol website.
Also Read: Get 1 Crore By Investing In PPF Wisely
Best performing mutual fund schemes in the last five years
The above table shows a mix of sectoral and diversified equity mutual funds that have delivered the best returns in the last five years. The sectoral funds include IT mutual fund schemes and one infrastructure mutual fund scheme that gave one of the best returns in the last five years.
Among the diversified equity mutual fund schemes, three small-cap mutual fund schemes and one mid-cap mutual fund scheme were among the top performers. The top performers include one Equity Linked Savings Scheme (ELSS) and a multi-cap mutual fund scheme.
Asset allocation: Key to earning good returns
Ideally, an investor should take a core-and-satellite portfolio approach towards equity mutual fund investments. The core portfolio can form 75%-80% of the overall equity portfolio, with investments spread across diversified (market capitalisation) equity mutual funds such as large, mid, and small cap schemes. The satellite portfolio can form the remaining 20%-25% of the overall equity portfolio, with investments spread across sectoral and thematic mutual funds. It is recommended to take the mutual fund SIP route while investing in these schemes.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.
