Best Mutual Funds For Long Term Investment

Mutual Funds were a rather remote concept until a few years back. Retail investors were sceptical about trusting their money in the hands of what many called an ‘investment broker’.

Over the years, the perception of mutual funds has changed, and investors who are looking to gain a substantial amount of profit from the market invest in mutual funds as their first preference.

Long-term mutual funds can conceive high amounts of returns if invested in the right fund and in the right proportion.

In fact, there are various advantages if you invest in a long-term fund. They are as follows:

• High Returns: Think of yourself as a footballer. Only if you play the sport for a considerable amount of years can you accumulate a large number of goals, which will, in turn, enhance your sporting career.
  
  A long-term fund is similar. If you invest for a longer period of time, you can expect a larger amount of return.
  
  
• Effectively Reduces Risk: Now, think that you are writing an examination. Suppose you have one hour to complete the examination, and you make a mistake in the paper; you may not be able to rectify the mistake due to the porosity of time.
  
  Now think if you have three hours to complete the same examination. You will be able to rectify the mistakes and complete the paper with a flourish. Long-term funds work similarly. Even if the economy faces a brunt during the investment period, it will have ample time to recover and make good returns by the end of the term.
  
  
• Tax Advantages: Investing in a long-term fund can provide you with ample tax advantages because, often, capital gains from long-term funds are taxed at rates which are below the tax slabs.

Top Mutual Funds For Long Term Investment

Factors to Consider Before Investing in Long-Duration Mutual Funds

Here are some crucial factors that one must look into before investing in the best mutual funds to invest in India for long term-

• Interest Rate Outlook

Evaluate the prevailing and anticipated interest rate environment as long-duration funds are sensitive to rate changes, with potential gains when rates decline and risks of price declines when rates rise.

• Credit Quality

Assess the creditworthiness of the underlying bonds held by the fund, as it determines the risk of default and impacts the overall stability and returns of the investment.

• Fund Manager Expertise

Research and consider the track record and experience of the fund manager, as their skill and decision-making play a crucial role in managing the fund's portfolio and generating consistent returns.

• Expense Ratio

Compare the expense ratios of different funds, as lower expenses can enhance overall returns, especially over the long term.

• Investment Horizon

Align your investment horizon with the fund's maturity profile, as longer durations require a longer commitment and may be more suitable for those with a longer-term investment outlook.

• Diversification

Assess the fund's diversification across various issuers, sectors, and types of bonds to mitigate concentration risks and ensure a well-balanced portfolio.

Overview of Best-Performing Mutual Funds For Long Term Investment

We will now look at some of the most beneficial long-term funds that can be invested in

1. SBI Bluechip Mutual Fund

This is a large-cap equity fund which was launched on January 1, 2013.

The main objective of this fund is to encourage investors for long-term capital growth. It provides investors with a diversified portfolio to channel their investments in large-cap equity stocks.

How Safe is it? 

All mutual funds carry an element of risk because they primarily invest in stock. This fund, however, is the least risky kind of mutual fund as it invests only in large-cap companies.

2. Aditya Birla Sun Life Small Cap Fund

This has been rated as the second-best mutual fund in the small and midcap categories. It was initiated on 1^st Jan 2013. The fund mainly aims to accumulate growth in capital by investing in equity and equity-related securities of small and midcap companies.

The minimum investment of this fund is Rs.1000, and what makes it more attractive is that it is an open-ended fund. The fund manager is Mr Jayesh Gandhi.

How Safe is it?

Since these funds invest in small and mid-cap companies, they are more volatile in nature.

However, they promise much higher returns than investing in large cap companies.

But since you are investing for a long term, you must be acquainted with your long-term goals, and you must analyze the market accordingly.

3. Nippon India Small Cap Fund Direct Growth

This is a small-cap fund which was incepted on 1st January 2013.

The fund managers are Dhrumil Shah and Samir Rachh.

The fund provides only open-ended schemes and has three schemes in total. As of now, the track record of this scheme has been good and has garnered good market returns.

How Safe is it?

As mentioned above, small-cap funds are comparatively riskier than large and mid-cap funds, and this fund has been rated as ‘moderately risky’. However, this fund is ideal for investors who are looking for long-term capital growth.

4. SBI Magnum Multicap Fund

It consists of a diversified portfolio which invests in equities, debts and hybrid stocks. Why many people choose multi-cap funds because it balances out the risk and is recommended if one wants to invest for a longer period of time. It was launched on 4th January 2013

The investment strategy follows a bottom-up approach, and it chooses companies from various sectors.

How Safe is it?

The risk factor can be adjusted between low to moderate. However, the returns will not be as high as some of the other funds that have been analyzed.

Conclusion

People often wonder which mutual fund is best for long term. Well, investing for the long term is a good choice, but picking the right mutual funds for long term is a wise one.

Based on your risk diet and the investment quota, make sure you consider all the above-listed factors before you make a decision.

Ascertain all the possible facets and then go ahead so that you can enhance your returns and overcome the risk effectively.

Happy Investing!

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

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Research Analyst - Himanshu Sinha