Investing in Mutual Fund is where a Fund Manager brings your money into functions. Equity Mutual Fund is one of the kinds of Mutual Fund where consumers invest their assets into shares or stocks of different companies, having the objective of generating a higher return on investment. Here we will try to pick which are the 5 best equity mutual funds to invest now.
As per SEBI, in Equity Mutual Fund consumers deposits at least 65% of their assets whereas, only 10%-35% in Debt instruments. Equity Mutual Fund is popular for its higher return compared to the Debt Fund, but it is also riskier than Debt Fund as they depend upon the conditions of the market.
Now, Equity Mutual Fund can be categorized from the following viewpoint:
- Benefits in Tax
- Investment Strategy
- Size of the invested company
Also Read: Different Types of Mutual Funds
Why Consumers Will Buy Equity Mutual Fund?
- When a consumer buys any Mutual Fund his/her money gets combined with other investors in the fund. This helps them to assort than holding individual stocks, which camouflage the effect of poor performers and taking the benefits of those investments whose earning potential is higher.
- Now everyone doesn’t have the capability of managing his/her own investments. Here, anyone willing to invest can easily pool their money and leave it upon the Fund Manager regarding the investment decisions. Fund Manager bears the responsibility and efficient enough to decide where to invest and when to buy and sell the investments.
- It is easier for consumers to buy and sell as its availability is wide in range. Like through Banks, Investment Firms, Financial Planning Firms. You can sell your investment anytime if you need to generate money, but yes, the money you generate may be less than what you invested.
Benefits of Investing in Equity Mutual Fund
- Equity Mutual Funds are known for their higher return on investment than Debt Funds.
- Assortment of the portfolio to minimize the chances of risks.
- Equity Funds are managed by Fund Managers having professional knowledge and this makes the customer burden free in investment planning.
- It offers tax exemptions of Rs.- 1.5 lakhs, stated in U/S 80(C) of the Income Tax Act, 1961 for the investment in ELSS funds.
- Cost of investment in Equity Funds is low.
When an Investor should invest in Equity Mutual Fund?
Not everybody is suitable for all schemes of the Mutual Fund. Investor can invest in equity mutual fund if she/he is interested in long term investments i.e., 5 or more than 5 years. It gives a high probability of higher return.
If he/she is a new investor and is not yet familiar with the concepts of market and how it works then he /she should invest in large-cap equity funds with top-listed 100 companies, having a powerful business plan as they remain stable under adverse circumstances.
Things To Be Remembered before Investing
- Your financial goal should be specific. Only calculating in mind will not help. It should be well evaluated too.
- High risks are involved as brings high returns on investment. You should assess your risk properly before investing.
- Well management, as well as a professional fund manager with proper knowledge, is very important. Choosing proper funds under well known and trustworthy fund house is equally important.
- One must have adequate patience to hold the fund for the proper time being. If he/she is searching for short term investment then equity fund is not the apt option.
- Different kinds of costs are involved like expense, entry load, exit load. One should consider these costs before investment.
The following criteria is used to screen the Best Equity Mutual Funds
- Asset under Management (AUM) size is to be more than 500 cr as higher the AUM means it has gained the investors’ confidence to put the money in those funds.
- Presence of at least 5 years in the market. A 5 years presence in the market signifies that it is time tested across various market situations.
- Overall consistent performance and beating of benchmark index.
- At least 4 star rating from valueresearchonline and Morningstar India. Higher rating indicates that the funds can perform well with respect to the others.
- I have not segregated across the fund categories, Large Cap, Mid cap and Small cap funds. All types of funds are included in the list. This time wanted to pick one from each category.
- I have taken the data for direct plans as we have sufficient data. Hope you are already aware that investing in direct fund gives you more return.
Now, Here Comes Top 5 Best Equity Mutual Funds to Invest
1. Mirae Asset emerging Bluechip fund
This fund includes mid-cap and large-cap fund where 60% of assets are invested to Large-cap companies and 40% are invested in the mid-cap companies. Here Fund Manager allocates the assets and plans to invest in the growth-oriented business to hold the value for a long time.
This fund brings consistency in performance. It contains both mid-size companies as well as large size companies. The fund is continuously beating the benchmark index S&P BSE 200.
The AUM as of June 2020 is more than 9000 crore rupees. The minimum investment is set as Rs 5000 and the last 5 year return from this fund is 12.5% which is quite good.
It has Alpha of 2.79 and Beta is more than 1. The fund manager of Mirae Asset Emerging Bluechip fund is reputed in their field and managing the fund since 2013.
2. Axis Long Term Equity Fund
This fund intends at long term capital generation, with a lock-in period 3 years with a tax rebate. This fund strikes a balance between the large-cap companies and mid-cap companies. They focus on growth scenarios and quality.
Investment can be made with a minimum amount of Rs. 500 and is very simple to invest in. The annual investment is Rs. 1.5 lakhs then as per U/S 80 (c ) of the Income Tax Act, 1961 then this fund is exempted from tax. But, one cannot withdraw money before 3 years of the lock-in period.
The fund has grown to a giant size of more than Rs 20,000 crore and continuously beating the benchmark return which is S&P BSE 200.
Remember the lock in period in case of SIP in case of ELSS funds. Every SIP is considered as fresh purchase and the investment is locked 3 years from the investment date. You have to wait for 3 more years after your last SIP if you want the money at one go.
3. Mirae Asset Large-Cap Fund
Mirae Asset Large Cap Fund is very well known fund in Large Cap category. From the analytical report, this fund has outraged its yardstick in 1 year, 3 years, and 5 years of investment return. The return for a long term horizon such as 7 year and 10 year period it has beaten its peers in the category. The benchmark index for this fund is S&P BSE 100.
The fund contributes some portion (around 15%) of the total asset in mid-cap companies and that means there is deficiency in full investments towards the large-cap companies. It is flexible in nature. This fund can be the ideal one for those who want to invest in the stock of bigger companies.
The expense ratio of this fund is very low 0.6%. This is not apt for the customers who have the mentality of short term investment. The minimum investment is set as Rs 5000.
4. SBI Small Cap Fund
This fund primarily invests in small-cap stocks to enhance the growth structure and some portion in mid cap for stability. One who is willing to fetch higher risk for higher returns can opt for this fund. The investor should not withdraw money before 7 years of the lock-in period for better expectations.
Minimum initial investment in this fund is Rs 5000 and the expense ratio for direct fund is around 0.9.
The fund manager is managing this fund since a long time. The benchmark for this fund is S&P BSE small cap and the chart shows that the fund is successfully beating the benchmark.
Note: If any mutual fund unit is sold after 1 year from the date of investment then earning up to Rs.- 1 lakh in a financial year will be exempted from tax but if the earning is over Rs.- 1 lakh then it is taxable @10%. If any unit is sold is within 1 year from the date of investment then the earning will be taxable @15% of the financial year. No tax is to be paid till you hold any unit.
5. Invesco India Mid Cap Equity Fund
Invesco India Mid Cap Fund is one of the front runners in the Mid Cap category. It primary invests in mid cap companies such as Balkrishna Industries, Muthoot Finance, Ajanta Pharma etc.
Those who want to invest for long term can think of this fund as an option. It focuses on investing in mid-cap funds where there is a comparatively lower risk than the large-cap funds with adequate returns. The AUM size is around 900 crore rupees. The minimum investment in this fund Rs 1000.
This fund has high 5 year Alpha of 2.6 and beta is as low as 0.89. The benchmark index is S&P BSE Midcap and it successfully beating the benchmark index.
Selecting the Best Fund
Investing in Mutual Funds is proved to be right over the years. For that, one should have a clear vision of his investment planning and to choose the right scheme of the fund under a reliable fund house is necessary. As we know, all schemes are not suitable for all kinds of investors. Other than the above-mentioned Equity Mutual Funds there are many more which may be good for some investors. We just need to find the correct one for us and fulfilling our investment goals.
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Disclaimer: The above mutual funds are for study purpose only. Please contact your financial planner before investing in any of the funds.