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 bunch of other factors. Some of these factors are hard to predict.

Solution:

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

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 – example sectoral funds – that invest in the particular sector

Between these categories, you can choose the ones based on your risk level. From 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.

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:

 

Here is an example of a portfolio of two funds – one multi cap and another mid-cap fund – that has minimum investment amount of just Rs 1000 – SIPs of Rs 1000 for 20 Years. This portfolio has two mutual funds

Once you have invested in a portfolio, you need to review it every year and rebalance (sell the fund that does not meet the criteria and buy another one)