Mutual Funds are the best tools for long term wealth creation. But, the challenge is to identify good and top performing mutual funds that can help you in achieving your Financial Goals.
There are hundreds of mutual fund schemes which are available in the market. Besides this, there are plethora of NFOs (New Fund Offers, new schemes) which keep hitting the market.
Identifying good mutual fund for long term investment is not an easy task.‘Wealth creation’ is like Test cricket where a quick fifty or hundred may not always win you a game.
You need the solidity and consistency of a Rahul Dravid or a Laxman more often than the flamboyance of a Sehwag to be able to emerge victorious over the five days.
A ‘good mutual fund scheme’ is one that consistently manages to outperform the Category it belongs to and also its Benchmark.
I have tried my best to identify top performing and best Equity Mutual Fund SIPs (Systematic Investment Plans) that you can choose to invest in 2015.
Kindly remember, you first need to identify your investment objective, time horizon of investment and risk appetite to arrive at your Investment Plan. Equity Mutual Funds are risk oriented products.
Invest in these top performing mutual funds through SIPs (or lump sum) if your time horizon is atleast 5 or more years.
Methodology to select Top Equity MF for SIPs :
I have judiciously followed the below points to shortlist the best equity mutual funds :
- Returns : I have shortlisted these top performing equity MFs based on SIP returns (using SIP Returns Calculator of Moneycontrol.com). I have considered monthly SIP.
- Another factor is ‘the age of the fund’. How long has the mutual fund been in existence? That gives us a chance to look at its performance over long periods of time. Funds with a good track record for the last 5 to 10 years have been preferred.
- Risk Vs Return : Some funds may generate very good returns but at the cost of very HIGH RISK. We need to look at risk-return trade off also. I have spent good amount of time on checking some of the important ratios to measure risks of mutual funds. These are like Standard Deviation, Alpha, Beta, Sharpe Ratio and overall Risk grades of the funds.
- I have also considered Expense Ratio (in % terms) as one of the factor. (What is Expense ratio? Expense ratio shows the amount that mutual funds charge for managing the investors’ money)
- I have also checked the current investment portfolios of all these funds.
- I have not considered the STAR ratings of funds provided by Ranking agencies. Usually these star ratings reflect the short term (1 or 2 year’s) performance of the funds.
- The primary sources of information are valueresearchonline.com and Moneycontrol.com.
- I have tried to identify top performing mutual funds based on the Fund Categories like Large cap, Diversified, Small & Mid-cap, Balanced and Tax saving (ELSS)
15 Top Performing Equity Mutual Fund SIPs in India
Top 3 Best performing SIP Large Cap Equity Mutual Funds :
There are roughly around 148 Large cap oriented Equity mutual fund schemes. The average returns of this fund category over a 5 year period is around 10.67% (as per valueresearchonline.com).
UTI Equity Fund and ICICI Prudential Focused Bluechip funds have LOW risk grades. Also, the standard deviation for both of the funds are on the lower side.
Both these funds have high Alpha (Alpha is ameasure of performance on a risk-adjusted basis. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha).
The other nearest competitors for these funds are HDFC Top 200 (lost due to high Standard Deviation), Franklin India Blue chip Fund, Birla Sunlife Frontline Equity Fund and ICICI Top 100 fund.
Some Important Points to ponder about Mutual Fund (SIP) Investments :
- I have tried to list some of the best performing equity mutual funds here. There is no necessity that you have to have a fund from each category to build a good investment portfolio. Kindly do not over clutter your portfolio. Select 2 to 3 good funds. That would be more beneficial
- Invest in Equity mutual funds if your time horizon is atleast 10 years. You can opt for Balanced funds if you time horizon is between 5 to 10 years. Invest for long term goals.
- Understand the risks associated with equity mutual funds. Kindly do not invest for quick gains or based on tips.
- Continuously track and monitor your mutual fund portfolio. If possible invest through online platforms.
- Do not time the market. Timing the market is almost impossible. Anytime is good time to invest in or to start SIPs.
- If your funds are generating negative returns, do not panic. Do not redeem or stop SIPs based on short term market movements. Continue your SIPs as long as possible. You may also consider increasing your SIP contribution amount on yearly basis. Small investments made at regular intervals can yield much better returns over a long period of time.
- It is advisable to build a mutual fund portfolio based on your Financial Goals. You may opt for variety of portfolios of mutual funds for different set of goals.
- Opt for Growth option of mutual fund schemes.
- If you are new to mutual fund investments then start with Balanced funds. (Visit my post on “Top Balanced Funds“)
- Kindly do not churn your portfolio at regular intervals
- Do not expect abnormal returns.
- Say NO to New Fund Offers (NFOs).
- Last but not the least, remember “Mutual Fund investments are subject to market risks. Past performance may or may not be sustained in future.”
You might have already invested in mutual funds. You may or may not find your funds in the above list of top performing Equity mutual fund SIPs. That does not mean your selection is wrong. Remember, we are selecting good funds out of hundreds of mutual funds schemes.
Curated from Top 15 Best Equity Mutual Fund SIPs for 2015