Which is the Best Mutual Fund Option to Invest Rs. 2,500 Per Month for 20 Years?

It is almost impossible to find a mutual fund that will be the best for 20 years. Performance on mutual funds depends on the fund manager and a bunch of other factors. Some of these factors are hard to predict.

Solution:

• Invest in a portfolio with 2 or 3 mutual funds
• Review and rebalance your portfolio every year

In this blog, we've compiled a list of the best Mutual Fund options to invest Rs. 2,500 per month for 20 Years.

How To Find the Best Mutual Fund Portfolio?

Since you want to invest for 20 years, equity funds are a good option. Why? You don’t have to worry about short-term volatility in the equities.

There are broadly four types of equity funds - Large Cap, Mid Cap, Small Cap, and Multi Cap funds investing in companies according to the market size their name signifies. Multi Cap funds invest in all three types of companies. There are other categories of funds as well - for example, sectoral funds - that invest in the particular sector:

Category Selection –

Between these categories, you can choose the ones based on your risk level. From a risk level perspective, Large Cap funds are relatively less risky as the companies they invest in are large and relatively stable compared to mid-cap and small-cap.

Best Mutual Funds to Consider Investing for 20 Years

Factors Or Important Parameters to Consider Before Shortlisting Funds - 

Once you have chosen the category, you can select some of the best-performing funds in the category. Here are some important parameters that you need to look at:

• Returns

The fund's returns should surpass the category benchmark by a wide margin.

• Assets Under Management

The Assets Under Management of the fund should not be too low or too high.

• Age

The fund should have a long enough track record to evaluate performance.

• Expense Ratio

The expense ratio of the fund should not be very high.

• Track Record

The fund should have a track record of beating the benchmark consistently in the recent past.

• Sharpe Ratio

The funds’ Sharpe ratio for equity should be significantly higher than the benchmark.

• Debt Rating

The debt rating of the fund should be at least AA. 

Performance of The Best Mutual Funds for Investment for 20 Years

Here is a list of some of the best performing mutual funds last 20 years in India-

1) Aditya Birla Sun Life Tax Relief

Aditya Birla Sun life tax relief 96 fund, with a 5-star rating from Groww, is one of the top ELSS funds. Its 3-year and 5-year returns of 17.4% and 19.7% p.a. have consistently beaten the benchmark index.

The scheme aims to provide growth of capital along with income tax exemption to investors.

2) Nippon India Small Cap Fund

The fund has over 95% allocation in equity and equity-related securities. A modest 3% of the AUM is invested in cash and cash equivalents, to make use of any suitable opportunity that may arise in this volatile market.

Nippon India small cap is another very good long-term investment choice, this time from the small-cap category. The fund is one of the best and it has a 5-star rating on Groww.

The investment objective of the scheme is to generate long-term capital appreciation from a portfolio of equity and equity-related securities, by investing predominantly in mid and small-cap companies. 

3) L&T Mid Cap Fund

The fund has over 98.7% allocation in equity and equity-related securities. A modest 1.3% of the AUM is invested in cash and cash equivalents, to make use of any suitable opportunity that may arise in this volatile market.

The investment objective of the scheme is to generate long-term capital appreciation from a portfolio of equity and equity-related securities by investing predominantly in mid-cap companies. 

4) Mirae Asset India Equity Fund

Mirae Asset India Equity Fund has delivered 3-year and 5-year returns of 19.1% and 19.7% p.a., respectively. For a long-term investment, these are the kind of returns you are looking for.

The investment objective of the scheme is to generate long-term capital appreciation by capitalizing on potential investment opportunities through predominantly investing in equities and equity-related securities.

5) Axis Mid Cap Fund

The fund has over 82% allocation in equity and equity-related securities. A strong 17% of the AUM is invested in cash and cash equivalents to make use of any suitable opportunity that may arise in this volatile market.

Axis Midcap Fund Axis Midcap fund is a very good long-term investment choice in the mid-cap category.

Conclusion

Mutual Fund investing is a long-term endeavour. The people who have the ability to be patient and keep investing consistently over an extended period of time succeed. Although it seems simple, putting it into practice is difficult. Not for the majority of investors, at least.

One of the strongest financial decisions you will ever make is to patiently invest for 20 years, ideally from the beginning of your career. It will shield the investor from market volatility and fluctuations in addition to assisting in generating returns that are multiplied.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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Research Analyst - Himanshu Sinha