Table 1 shows the overall performance of
equity mutual funds. The returns provided by equity mutual fund is higher
compared to other investment avenues i.e. debt mutual funds, provident fund and
so on. Hence investors looking for higher returns and ready to tolerate
fluctuations can park their money in equity mutual funds.
Large cap funds-
The returns given by these
funds are quite stable as they are less volatile to the changes in the market but
are not high as compared to mid and small cap. This is beneficial for people
who want exposure to the equity markets without taking high risks with their
Mid and small cap-
The schemes have given an average return
of 13% in one year, 15% in three years and 25% in five years. From the table it
can be seen that people investing in mid and small cap should keep their
fortunes invested for a longer period of time to get better returns. People
willing to take more risk with their money can opt for this fund.
Equity oriented balanced fund-
This fund has 65% (or higher) of total
sum invested in equity funds and remaining in other category funds (like debt
mutual funds). Balanced equity funds are beneficial as they help to mitigate
the risk of uncertainty and high losses. Hence the returns in various time
periods show consistency compared to other schemes.
Equity funds technology-
Currently there are five schemes in this sector. The 1 year return generated from the
schemes range from 30%-50%. However, none of the schemes have an AUM higher
than 300 crore. Tata Digital India Fund-Regular
Plan-Growth has generated 50.05% return in past one year.
Though it may sound very tempting to invest but the scheme was launched at the
end of 2015 and has not even completed 3 years. So, it is not suggested to rely
on one or two years data. Previously the sector was not doing well for more
than two years. However, recently it has picked up its pace. Better earnings of
IT companies like Tata Consultancy Services have led to increase in returns. Also, IT is an export- based sector and has gained
from recent depreciation in the domestic currency.
Pharma equity fund-
The pharma sector has not been
performing well in the past few years and which is clearly evident in their
returns. In last 3 years the returns have been -1.77%. The only scheme that has
given positive returns in this sector is Reliance Pharma Fund-Growth Plan-Growth
Infrastructure equity funds –
This sector was not performing well
nearly ten years ago but is now yielding a good return. In our view, given the
push of the government on infrastructure funds, we believe it to be a good
investment over a 3 year time frame. L&T Infrastructure Fund can be
considered for investments.
Diversified equity funds -
As the name suggests diversified mutual
funds invests in multiple stocks to reduce the risk of lower returns. This
scheme has shown consistency in their performance and is recommended for
Equity funds banking-
This sector fund was yielding higher
returns till last one year. Past 1 year has been only 5.82% which is even lower
than bank fixed deposit. The main reason for the poor performance is due to the
Nirav Modi scam that hit PNB bank. Nationalized banks too have been suffering
from the NPA problem for over 3 years that is causing the returns to look
subdued. For investors looking to take exposure to the Banking sector, our
recommendation would be to select one that invests only in private sector banks
Equity fund FMCG-
The returns given by FMCG mutual funds
has been quite good and consistent in the past few years. Top two schemes
generating returns in this sector are SBI FMCG Fund - Regular – Growth and
ICICI Prudential FMCG Fund – Growth.
We believe that, given the huge
population, there is tremendous opportunity in this sector.
Thematic funds have given a good return
in past few years. Companies like Tata, Aditya Birla Sun Life, Mirae Asset etc
have their schemes under this fund. However thematic funds are very risky and we
do not recommend them because they invest across sectors that revolve around a
common theme. If the theme selected by the investor falls it may even lead to
ELSS is a tax saving mutual
fund having 3 years lock in period under section 80 C. The one year returns
given by ELSS is 12.57% which is much higher than other investment options. It
is the best place to make investments under Section 80C as it not only provides
income tax benefits but also better returns.