Which Type of Mutual Fund is Best for Long-Term Investment?

“If you are Not Willing to Own a Stock for 10 Years, Do Not Even Think About Owning it For 10 Minutes.” – Warren Buffet

By Rusen Kumar

Something valuable is said here by someone who has made the most out of the stock market. Well, when it comes to the stock market, and you want to be an investor, not a trader, then holding on to it long-term matters. Also, if you have money now that you feel you would not use shortly, why don’t you put that money to work. Let me make it look cooler. Now that you have worked hard and long for that money, it is time the money works hard and long for you. While you invest long-term in mutual funds, you can watch it while it works.

But here comes the tricky part. What is the best mutual fund investment for the long term? I bet you do not have the answer to that, and that is why you’ve come here. There is not a single type of mutual fund, and there are just so many options to start choosing from. Now, as I said before, it is your hard-earned money. You have worked so long, so hard for it, which means you do not want to just buy something, do you? A thousand questions would pop up in your head, what is the best large-cap fund? Should I choose high-risk or moderate risk? Well, it is natural to have these questions pop up in your head, and also, you are not paranoid. I would do the same too. So, here we get to see the best mutual funds for a long-term investment.

How to Find the Best Long-Term Mutual Funds?

Well, this will change now and then. We all know change is the only constant and is very evident in the case of the stock market. So here, I will grade some good long-term mutual funds to make sure you get an idea of funds you can choose. How these funds are graded, I will tell you. We will take into account the best-performing mutual funds for the last five years. Here they are:

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1. Axis Bluechip Fund – Large Cap Fund

The Axis Bluechip Fund, launched by Axis Mutual Fund, has an AUM of INR 29,160.6 crore and invests in blue-chip stocks or equities of significant firms that are financially secure and established. They are less volatile and considered as one of the best large-cap funds than mid-cap or small-cap stocks and have adequate liquidity, classified as high risk, with a minimum SIP of INR 500 and a minimum lump sum investment of INR 5000.

The Axis Bluechip Fund seeks long-term capital growth by investing in a broad portfolio, and it is appropriate for investors seeking long-term capital gain. The fund’s 5-year CAGR is 18.50%.

2. Canara Robeco Bluechip Equity Fund – Large Cap Fund

Canara Robeco Mutual Fund started this equity mutual fund scheme in 2013 to provide capital appreciation by primarily investing in companies with significant market capitalizations. Classified as extremely high risk, with a current Asset Under Management (AUM) of INR 3,691.25 crore and the minimum SIP (Systematic Investment Plan) at 1000.

While returns are taxed at 15% if the fund is redeemed within one year, consumers must pay 10% plus an LTCG tax on returns of INR 1 lakh or more in a fiscal year. The fund has a five-year CAGR of 18.08%.

3. Axis Mid Cap Fund

With an AUM of INR 13,834.27 cr, the companies chosen for this fund’s portfolio are those with significant growth possibilities to help with the investing goal of speedy wealth generation. While the Axis Midcap Fund is moderately risky, it is appropriate for people wishing to invest for 3-4 years and expect excellent returns.

However, because this is a high-risk fund, investors should be prepared for moderate losses in their investments. The fund has a 5-year CAGR of 21.13% and is best suited for long-term goals like education, retirement, and so on.

4. PGIM India Mid-Cap Opportunities Fund

The PGIM India Midcap Opportunities fund presently has an AUM of INR 2383.38 cr, with an expense ratio of 0.37% and a minimum SIP amount of INR 1000. The minimum lump sum amount is INR 5000 for units exceeding 10% of the investment. A penalty will be charged for redemption within 90 days. The PGIM India Midcap Opportunities Fund, which is classified as very high risk, is best suited for investors looking to invest for at least 3-4 years and expect substantial returns, with a 5-year CAGR of 21.23%.

5. Nippon India Small Cap Fund

The Nippon India Small-cap Fund, which focuses on small-cap firms across sectors, is extremely risky, with a minimum SIP contribution of INR 100 and a lump sum investment of INR 5000, with an exit load of 1% if redeemed within a month.

The fund was made available to investors in 2013, is appropriate for people with a wider risk appetite and expect better returns. Yet investors should be prepared for moderate losses due to the risk aspect. The fund has a five-year CAGR of 23.61%.

6. Parag Parikh Flexi Cap Fund

The Parag Parikh Flexi-cap fund was rated extremely high risk, has an AUM of INR 13,186.70 cr but a lower expense ratio of 0.89%. The fund has an exit load of 2% if redeemed within 365 days and 1% if redeemed between 366-730 days, with a minimum lump sum investment amount of INR 5000.

The fund is intended for people wishing to invest for 3-4 years and offers a 5-year CAGR of 21.51 percent. Its goal is to produce long-term capital appreciation by investing primarily in equities and equity-related assets.

7. SBI Small Cap Fund

The SBI small-cap fund has an AUM of INR 9,620.21 cr and a Net Asset Value (NAV) of INR 102.68 as of 16th Aug 2021. It has an expense ratio of 0.84%. The fund has a minimum SIP of INR 500 because of its extremely high risk.

Growth and value investing are both parts of the stock-picking approach. The fund, which has a 5-year CAGR of 23.31%, intends to provide investors with prospects for long-term wealth creation.

8. Mirae Asset Tax Saver Fund

The Mirae Asset Tax Saver Fund boasts a zero-exit load and a low expense ratio of 0.48%, as well as higher returns than the category average. As an open-ended ELSS, the fund has a three-year lock-in period and is willing to invest across market capitalizations. Its adaptable methodology provides a diverse portfolio of stable, established companies with good growth potential.

The Mirae Asset Tax Saver fund is best suited for those wishing to place their money in an investment for three years since it has a 5-year CAGR of 22.45%. The fund performs two functions: tax savings and long-term wealth creation.

9. PGIM India Flexi Cap Fund

The PGIM India Flexi-cap fund is extremely high risk and has an AUM of INR 1,688.70 cr. It aims to create income by investing in an actively managed diversified portfolio. The fund was made available to investors in March 2015, offering high returns, but investors should be aware of small losses due to its high risk. The 5-year CAGR of the PGIM India Flexi-cap fund is 20.79%.

10. Parag Parikh Flexi Cap Fund

The Parag Parikh Flexi-cap fund, which is rated extremely high risk, has an AUM of INR 13,186.70 cr but a lower expense ratio of 0.89 %. The fund has an exit load of 2% if redeemed within 365 days and 1% if redeemed between 366-730 days, with a minimum lump sum investment amount of INR 5000.

The fund is intended for people wishing to invest for 3-4 years and offers a 5-year CAGR of 21.51%. Its goal is to produce long-term capital appreciation by investing primarily in equities and equity-related assets.

Conclusion

Well, this is not a permanent analysis, and I am giving you a heads up. It can be only an overview. Moreover, there are much more factors than just the past performance of a fund. So, consider those factors and then make a choice.