5 Best Mutual Funds to Invest for Long Term Investment in 2020

Mutual Funds that invest in equities require a certain duration of time to give efficient returns to the investors. These investment instruments work best in the long term because it gives time for your holdings to grow and perform. According to market demand in the last few years, Mutual Funds for long term have gained popularity.

A time horizon of 5 years or longer is typically considered long term. Within mutual fund categories, mid cap and small cap funds perform best over a long term. This is because such companies have larger growth potential than large cap companies. Many of these funds have seen major corrections in 2019 allowing investors a power entry point in 2020.

Moreover, Equity Linked Saving Schemes (ELSS) are also considered as mutual funds for long term investments because they have a lock-in period of 3 years. So, if you want to accrue higher returns as well as save on taxes, you may choose to invest in ELSS.

5 Best Mutual Funds for Long Term Investments

Here are five most popular mutual funds for long term investments in 2020-

(Data as on 4th February, 2020; Source- Value Research)

1. HDFC Small Cap Fund

Small cap funds are known as one of the most risky bets. However, this risk is pacified when the funds are kept invested for longer duration. HDFC Small Cap Fund is designed to help the investors in reaching their long term financial goals. This fund has emerged as a consistent out-performer and that too by a vast margin. It has given 7% higher returns than its benchmark over 5-years and a whopping 9% over 3-years.

Returns 1 Year (%) 3 Year (%) 5 Year (%)
Fund -4.51 9.41 10.22
Benchmark 0.79 0.84 3.55

If you would have invested Rs.1,00,000 in this fund for 5 years, the accumulated corpus would have been Rs.1,62,667(Considering the 10.22% CAGR as per 4th February, 2020)

  • Under the expertise of the professional managers, the fund has aimed at allocating the assets into smaller companies with reasonable growth prospects, sound financial strength and sustainable business models like NIIT Technologies, Sonata Software, INOX Leisure, DCB Bank etc. to accrue higher returns
  • The stocks are picked up in such a strategic manner from sectors with acceptable valuation which brings proficiency in the portfolio. The best five sectors for allocation are- Services, Chemicals, Financial, Technology and Engineering
  • Due to predominance of asset allocation in equity securities of companies with potential to grow in future, you can earn consistent returns from this scheme over a period of time

Related Article: Best Small Cap Funds 2020 & Advantages

2. L&T Midcap Fund

Midcap Funds invest in companies ranging from the 101st largest to the 250th largest listed company in India. Such companies account for 15-20% of India’s total market capitalization. Many of them are typically dynamic, emerging challenges within their sectors and are likely to become tomorrow’s bluechip companies. L&T Midcap Fund is one such mutual fund.

Returns 1 Year (%) 3 Year (%) 5 Year (%)
Fund 9.15 8.82 11.04
Benchmark 10.52 8.28 9.88

If you would have invested Rs.2,00,000 in this fund for 5 years, the accumulated capital would have been Rs.3,37,619(Considering the 11.04% CAGR as on 4th February, 2020)

  • The fund has delivered 11.04% trailing returns in the 5 year period and 8.82% in 3 years; both of these are higher than the returns from its benchmark
  • The fund managers, Soumendra Nath Lahiri and Vihang Naik do not rely on a few concentrated bets to achieve this return and have instead built a diversified portfolio of 84 stocks
  • Finance, Construction, Healthcare, Chemicals and Engineering are the major sectors of allocation in the portfolio of this fund. And, City Union Bank, Cholamandalam Invest. & Fin., Manappuram Finance and Jindal Steel & Power are the top issuers
  • Investors in this fund have a good chance of seeing their wealth multiply manifold. But, it is suggested that if there is a chance of redemption in less than seven years, this fund should not be chosen

To view more Mid Cap Mutual Funds, Click Here

3. Franklin India Smaller Companies Fund

Franklin Templeton AMC (Asset Management Company) is one of the strongest fund houses in India’s terms of research and process. Franklin India Smaller Companies is one of Franklin Templeton AMC’s flagship funds.

Returns 1 Year (%) 3 Year (%) 5 Year (%)
Fund 0.33 2.70 7.40
Benchmark 0.79 0.84 3.55

If you would have invested Rs.1,00,000 in this fund for 5 years, your accumulated corpus would have been Rs.1,42,897 (Considering the 7.40% CAGR as on 4th February, 2020)

  • The fund was launched in January 2006, shortly before the bull market of 2003-2007 ended and the 2008 recession hit. However, it has still delivered a 17.83% annualized return since inception
  • Over the last 5 years, it has delivered a still higher 7.40% return. Also, this scheme has continued to beat its benchmark 2.70% returns accrued over a period of 3 year
  • The fund has been managed by R Janakiraman, more than a decade’s worth of experience placing investors in safe hands. In May 2016, Hari Shyamsunder joined the fund as a manager which added to its professional presence
  • With 71 stocks and a highly diversified approach, it is also well placed to survive market panics and down-cycles. HDFC Bank, Deepak Nitrite, Brigade Enterprises, Nesco and JB Chemicals & Pharma are the top issuers in the fund’s portfolio picked up from the top sectors- Finance, Construction, Chemicals and Services

4. DSP Small Cap Fund

This fund was so successful that it had to close its doors to inflows in February 2017, only reopening to SIPs and STPs in September 2018. The scheme is focused towards investing in a portfolio which is substantially comprised of small cap companies.

Returns 1 Year (%) 3 Year (%) 5 Year (%)
Fund 9.96 1.47 8.82
Benchmark 0.79 0.84 3.55

If you would have invested Rs.2,00,000 for 5 years in this fund, your accumulated corpus would have been Rs.3,05,192 (Considering the 8.82% CAGR as on 4th January, 2020)

  • The fund’s 5 year annualized returns stand at an immense 8.82% which is around 5% higher than the returns accrued by its benchmark
  • The fund manager takes a more focused approach than its peers with large positions in the sectors and stocks he’s bullish on such as Chemicals, Textiles, Automobile, Construction and Healthcare
  • Considering his past performance and successful track record, there are higher chances of these positions being multi-baggers than duds

5. Tata Retirement Savings Fund

Formulated for the investor’s retirement goals, this fund is an alternative to other traditional retirement plans. It is a Hybrid Fund which invests in equities of multiple capitalisations. It is a suitable fund for aggressive investors seeking long term capital appreciation.

Returns 1 Year (%) 3 Year (%) 5 Year (%)
Fund 12.54 11.49 10.78
Benchmark 8.68 10.74 7.29

If you would have invested Rs.2,00,000 in this fund for 5 years, the accumulated corpus would have been Rs.3,33,685 (Considering the 10.78% CAGR as on 4th February, 2020)

  • This fund has predominance of Finance sector in the portfolio and other defensive sectors such as FMCG, Construction and Energy
  • The managers have shown major allocation into SOV, AAA rated securities and cash & cash equivalents
  • It is a hybrid aggressive mutual fund meant for moderately high risk takers

Tax on Mutual Funds for Long Term

In India, gains in equity funds held longer than 1 year are taxed at 10% under the Long Term Capital Gains Tax (LTCG). And, gains up to Rs. 1 lakh are exempt from tax.

Advantages for investing in Mutual Funds for Long Term

The mark tends to show fluctuation and act differently for short term and long term investments. As the rate of returns are likely to change and remain volatile in the short term, long term investments prove to be comparatively less volatile and hold the potential to give higher returns. The absolute stability associated with long term investments make it ideal for investors with long term goals.

If the funds are invested for more than 1 year then the capital gains are relieved from tax liabilities. The government of India has also provided tax rebate on equity mutual funds under Section 80C of Income Tax Act.

When you invest in a mutual fund for a long term duration, you are allowed to exact the benefit of compounding. This implies that the interests accrued from the investment, which are not spent, are added to the principal over the period of time

Here is a list of more Mutual Fund Schemes for Long Term Investment:

Scheme Name 1Y Return 3Y Return 5Y Return AUM (Cr)
Axis Bluechip Fund – Direct Plan – Growth 19% 21% 12% 9,481.19
Axis Bluechip Fund Growth 18% 20% 11% 9,481.19
Mirae Asset Tax Saver Fund – Direct Plan 16% 19% 2,877.16
Axis Midcap Fund – Direct Plan – Growth 15% 19% 12% 3,859.37
Mirae Asset Tax Saver Fund – Regular Plan 14% 18% 2,877.16
Axis Long Term Equity Fund – Direct Plan 14% 17% 13% 21,159.93
Mirae Asset Emerging Bluechip Fund – Direct Plan 15% 17% 17% 9,229.46
Axis Midcap Fund – Growth 14% 17% 11% 3,859.37
Canara Robeco Bluechip Equity Fund – Direct Plan 17% 17% 11% 269.32
Invesco India Growth Opportunities Fund – Direct Plan 13% 17% 13% 2,107.91
Kotak India EQ Contra Fund – Direct Plan 12% 17% 11% 882.66
Mirae Asset Emerging Bluechip Fund – Regular Growth 14% 16% 16% 9,229.46
IIFL Focused Equity Fund – Direct Plan 29% 16% 13% 476.45
Axis Long Term Equity Fund – Growth 13% 16% 12% 21,159.93
Canara Robeco Equity Diversified – Direct Plan 14% 16% 10% 1,587.39
BNP Paribas Large Cap Fund – Direct Plan 19% 16% 10% 812.67
JM Tax Gain Fund – Direct Growth 15% 16% 12% 34.56
Canara Robeco Bluechip Equity Fund – Regular Plan 16% 16% 10% 269.32
JM Multicap Fund – Direct Growth 17% 15% 12% 141.82
Canara Robeco Equity Diversified – Regular Plan 12% 15% 9% 1,587.39
Invesco India Growth Opportunities Fund – Growth 12% 15% 11% 2,107.91
Axis Small Cap Fund – Direct Plan – Growth 20% 15% 13% 1,366.45
JM Tax Gain Fund – Growth 14% 15% 11% 34.56
Kotak India EQ Contra Fund Growth 10% 15% 10% 882.66
IIFL Focused Equity Fund – Regular Growth 27% 15% 11% 476.45
DSP Equity Fund – Direct Plan – Growth 18% 15% 10% 3,176.37
JM Multicap Fund – Growth 16% 14% 11% 141.82
Axis Small Cap Fund – Growth 18% 14% 12% 1,366.45
DSP Equity Fund – Regular Plan – Growth 17% 14% 10% 3,176.37
Invesco India Mid Cap Fund – Direct Plan 6% 13% 11% 644.95
LIC MF Infrastructure Fund – Direct Plan 16% 12% 6% 55.97
Tata Mid Cap Growth Fund – Regular Plan 9% 11% 9% 767.69
Invesco India Infrastructure Fund – Direct Plan 9% 10% 8% 40.59
LIC MF Infrastructure Fund – Growth 16% 10% 5% 55.97
Sundaram Rural and Consumption Fund – Direct Plan 4% 10% 12% 2,047.06
Sundaram Rural and Consumption Fund – Growth 4% 9% 12% 2,047.06
Invesco India Infrastructure Fund – Growth 7% 9% 6% 40.59
DSP Natural Resources and New Energy Fund – Direct Plan 4% 6% 13% 363.17
DSP Natural Resources and New Energy Fund – Regular Plan 3% 5% 12% 363.17

Source link

Comments (No)

Leave a Reply