Equity mutual funds are of many categories and correspondingly there good or bad performers in each such category. It is very important to select the right equity mutual fund. One wrong decision can lead to non-achievement of one’s investment goals.

In this article we cover those funds which an investor would be better off, if skipped. Moreover, we shall also throw light on the good funds from each category, which an investor could invest into.

Funds Not to Invest In

Tax Saving ELSS Funds

ELSS funds are one of the best investment options for tax savings. They have a lock-in period of 3 years.

However, investors must stay away from investing their wealth in the following funds from this category-

ELSS Funds to Avoid

  1. Union Tax Saver Scheme – Direct – Growth

This 5-year old ELSS scheme has been rated 1-star by Groww.

Falling in the Moderately High risk category, the fund has consistently underperformed the benchmark Nifty 500 index.

The Union Tax Saver scheme has delivered 1-year, 3-year and 5-year returns to the tune of 6.00%, 6.33% and 12.73% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index are 11.70%, 10.03% and 14.23% per annum respectively.

We can see that the fund has grossly underperformed the benchmark since inception and therefore can be given a miss.

  1. Baroda Pioneer Equity Linked Saving Scheme 96 – Direct – Growth

This 3-year old ELSS scheme has also been given a 1-star rating by Groww. This fund, too, belongs to the Moderately High risk category. The fund has consistently underperformed its benchmark index, since inception.

This fund by Baroda Pioneer Mutual Fund has not performed well comparatively and delivered 1-year and 3-year returns to the tune of 5.01% and 9.78% per annum respectively. During the abovementioned period, the benchmark index delivered returns to the tune of 11.70% and 10.03% per annum respectively.

It is clearly evident that the fund has missed its mark by a good margin and underperformed the benchmark since inception. Due to the abovementioned reasons, this fund can be given a miss.

  1. BNP Paribas Long Term Equity Fund – Direct – Growth

This 5-year old ELSS scheme has also been rated 1-star by Groww. The scheme falls in the Moderately High risk category, but still has consistently underperformed its benchmark Nifty 500 index.

The BNP Paribas Long Term Equity Fund has delivered 1-year, 3-year and 5-year returns to the tune of 6.75%, 8.74% and 18.10% per annum respectively. Corresponding returns for the same period as delivered by the benchmark NIFTY 500 index are 11.70%, 10.03% and 14.23% per annum respectively.

Since the fund has not outperformed the benchmark regularly, it would not be recommended as a good investment option.

Which ELSS Funds to Invest In?

Here are Some Good ELSS Funds

Co-existing with the bad performers are the good performers or if we could say, star performers. These funds, rated 5-star by Groww, have provided stellar returns on a consistent basis and therefore are recommended investment options in this category.

Read more about these tax savings funds.

Following is a list of best ELSS funds-

  1. Aditya Birla Sun Life Tax Relief 96

Contrary to the abovementioned funds, this fund by the Birla Sun Life Mutual Fund house has been a star performer. It has consistently beaten its benchmark NIFTY 500 index. The 1-year, 3-year and 5-year returns for this fund are 16.69%, 15.55% and 23.28% per annum respectively.

It is as clear as the sky that the fund has provided stellar returns to its investors.

  1. IDFC Tax Advantage (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund is another fund with benchmark-beating returns. This 5-year old fund has delivered returns to the tune of 14.77%. 14.45% and 22.56% per annum over a 1-year, 3-year and 5-year period. The corresponding returns for the benchmark NIFTY 500 index are 11.70%, 10.03% and 14.23% per annum respectively.

  1. DSP BlackRock Tax Saver Fund

DSP BlackRock Tax Saver Fund has been given a 4-star rating by Groww. Its 1-year returns of 6.03% is lower than the benchmark returns of 11.70% during the same period. However, in the longer term of 3-years and 5-years the fund has convincingly outperformed the benchmark Nifty 500 index.

It has delivered 3-year and 5-year returns of 14.05% and 20.30% respectively. During the same period of time, the benchmark had delivered a modest 10.03% and 14.23% respectively.

Large Cap Funds

Large-cap funds are considered the least risky of all equity funds. They are the most stable among equity funds.

The funds best avoided in this category are-

Large-cap Funds to Avoid

  1. Baroda Pioneer Large Cap Fund

This 5-year old ELSS scheme has been given a 1-star rating by Groww. This fund belongs to the High risk category but the returns have not been commensurate. The fund has consistently underperformed its benchmark index.

The fund has delivered 1-year and 3-year returns to the tune of a modest 2.15% and 6.62% per annum respectively. During the abovementioned period, the benchmark index, Nifty 50, delivered returns to the tune of 10.71% and 8.03% per annum respectively.

The 5-year returns, however, for the fund have been better at 14.56% per annum, greater than 114.74% per annum delivered by the benchmark index.

It is clearly evident that the fund has missed its mark by a good margin and underperformed the benchmark since inception. Due to the abovementioned reasons, this fund can be given a miss.

  1. HSBC Dynamic Fund

This 5-year old ELSS scheme by HSBC Mutual Fund has been rated 1-star by Groww. Falling in the Moderately High risk category, the fund’s returns have been inconsistent and volatile at best.

The HSBC Dynamic Fund has delivered 1-year, 3-year and 5-year returns to the tune of 9.93%, 9.98% and 12.86% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index are 11.70%, 10.03% and 14.23% per annum respectively.

We can see that the fund’s performance has not been volatile, thus not very attractive and therefore can be given a miss.

Large Cap funds to Invest In

After having gone through the large-cap category funds which are best avoided, we now move on to the best performers in this category.

Know more details about these 3 large cap funds.

These funds have consistently delivered benchmark-beating returns. The following is the list for the same-

  1. Mirae Asset India Equity Fund

This 5-year old ELSS scheme has been given a 5-star rating by Groww. This fund belongs to the Moderately High-risk category and the returns have correspondingly been commensurate.

The fund has delivered 1-year, 3-year and 5-year returns to the tune of 9.88%, 14.80% and 21.59% per annum respectively. During the abovementioned period, the benchmark index, Nifty 50, delivered returns to the tune of 10.71%, 8.03% and 11.74% per annum respectively.

It is clearly evident that the fund has beaten its mark by a good margin. Due to the abovementioned reasons, this fund is a good investment option.

  1. Reliance Large Cap Fund

Contrary to the above-mentioned funds, this fund by the Reliance Mutual Fund house has been a star performer. It has fairly beaten its benchmark NIFTY 500 index. The 1-year, 3-year and 5-year returns for this fund are 9.06%, 11.59% and 19.02% per annum respectively.

It is as clear as sky that this 5-year old fund has provided stellar returns to its investors. One can opt to invest in this fund, if his investment objective matches with the deliverables of this category.

  1. SBI Bluechip Fund

SBI Bluechip Fund has been given a 4-star rating by Groww. Its 1-year returns of 8.94% is lower than the benchmark returns of 10.71% during the same period. However, in the longer term of 3-years and 5-years the fund has convincingly outperformed the benchmark Nifty 50 index.

It has delivered 3-year and 5-year returns of 12.64% and 19.11% respectively. During the same period of time, the benchmark had delivered a modest 8.03% and 11.74% respectively.

The following are good bets for those willing to invest in mutual funds in this category, form the perspective of earning good returns on their investments.

Mid Cap Funds

These funds give higher returns than large-cap funds and their risk is higher.

The funds best avoided in this category are-

Mid-cap Funds to Avoid

  1. Escorts Growth Plan

This 5-year old ELSS scheme has been rated 1-star by Groww. Falling in the Moderately High risk category, the fund has consistently underperformed the benchmark Nifty Free Float Midcap 100 index.

The Escorts Growth Plan has delivered 1-year, 3-year and 5-year returns of 13.98%, 13.78% and 21.96% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index are 10.21%, 12.93% and 19.13% per annum respectively.

  1. Baroda Pioneer Mid Cap Fund

This 5-year old ELSS scheme has also been given a 1-star rating by Groww. This fund belongs to the High risk category. The fund has consistently underperformed its benchmark index, since inception.

This fund has not performed well comparative to its peers and delivered 1-year and 3-year returns to the tune of 10.04%, 5.59% and 7.96% per annum respectively. During the abovementioned period, the benchmark index delivered returns to the tune of 10.21, 12.93% and 19.13% per annum respectively.

It is clearly evident that the fund has missed its mark as far as returns in the longer period of 3 and 5 years are concerned. Due to the abovementioned reason, this fund can be avoided as compared to others in the market.

  1. IDBI Midcap Fund

This 1-year old, relatively new ELSS scheme has been given a rating of a modest 2 stars by Groww. Falling in the Moderately High risk category, the fund has consistently under-performed the benchmark Nifty Free Float Mid-cap 100 index.

The said fund has delivered returns lower than that of the benchmark, delivering a return of 6.84% per annum. The fund has a modest fund size of ₹ 299 crore.

Mid Cap funds to Invest In

The above-mentioned funds have not proven to be good bets in this category. However, there are some other funds which have hit the bull’s eye. They have performed well and delivered excellent returns for their investors.

Read details about these top mid cap funds.

Some of them are-

  1. L&T Midcap Fund

This fund has been rated 5-star by Groww. It has completely justified its high risk category status. The fund has performed exceedingly well with 1-year, 3-year and 5-year returns of 9.62%, 19.28% and 29.37% per annum respectively. 5-year return of around 30% is as best as it gets, a feat achieved by only a few other funds.

Corresponding returns for the same period as delivered by the benchmark index are 2.06%, 12.67% and 18.24% per annum respectively.

Without an iota of doubt, L&T Midcap Fund has a good track record and can be a good investment option in the mid-cap category.

  1. DSP Blackrock Equity Opportunities Fund

This fund has also been rated 5-star by Groww. This 5-year old fund falls in the moderately high risk category and has a fund size of almost ₹ 5000 crore.

The fund has delivered 1-year, 3-year and 5-year returns of 8.26%, 15.49% and 20.23% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index Nifty 500 are 8.00%, 10.78% and 14.37% per annum respectively.

Investors looking to tap the market potential by investing in mid-cap stocks and taking some risk can consider DSP BlackRock Equity Opportunities Fund.

  1. Mirae Asset Emerging Bluechip Fund

Common with all the other funds in this list, the Mirae Asset Emerging Bluechip Fund has been rated 5-star by Groww. It has completely justified its high risk category status with stellar returns.

The fund has performed exceedingly well with 1-year, 3-year and 5-year returns of 6.49%, 20.22% and 30.76% per annum respectively. 5-year return of slightly greater than 30% is a commendable return that can delight almost any investor.

Corresponding returns for the same period as delivered by the benchmark index are 2.06%, 12.67% and 18.24% per annum respectively. The fund’s 5-year returns have beaten benchmark by over 10%. That alone speaks a lot about the performance and potential of the said fund.

Without batting an eyelid, Mirae Asset Emerging Bluechip Fund can be a good investment option in the mid-cap category.

Small Cap Funds

These are very high growth funds. They invest in small companies with big potential for growth. They have higher risk than mid-cap funds.

This category plays the high risk-high return game. While in bullish periods, this category can deliver unimaginable returns; it can also prove to be extremely volatile.

In this regards, the fund best avoided are-

Small Cap Funds to Avoid

Union Small and Midcap Fund

This 4-year old, has been rated 1-star by Groww. Falling in the High risk category, the fund has underperformed the benchmark S&P BSE SMALL CAP index.

The said fund has delivered returns lower than that of the benchmark, delivering 1-year and 3-year returns of 4.72% and 8.98% per annum. Corresponding returns for the same period as delivered by the benchmark index are 7.56% and 14.34% per annum respectively.

On account of low returns, this fund can be given a miss in this category.

Small Cap funds to Invest In

Here are some of the funds in the small-cap category which have beaten the benchmark.

Get to know more details about these small cap funds.

Some of them are-

  1. HDFC Small Cap Fund

This fund has been rated 5-star by Groww. This 5-year old fund falls in the high risk category and has delivered commensurate returns as well.

The fund has delivered 1-year and 3-year returns of 23.73% and 23.27% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index S&P BSE SMALL CAP are 7.56% and 14.34% per annum respectively.

Investors looking to invest in small-cap stocks and taking some risk can consider HDFC Small Cap Fund.

  1. Reliance Small Cap Fund

As with other 5-stared funds, the Reliance Small Cap Fund has been rated 5-star by Groww. Although the fund has been categorized as highly risky, the returns have more than compensated for the risk.

The fund has performed exceedingly well with 1-year, 3-year and 5-year returns of 14.85%, 23.69% and 35.79% per annum respectively. 5-year return of a stellar 35% is almost unparalleled feat.

Corresponding returns for the same period as delivered by the benchmark index are 7.56%, 14.34% and 22.17% per annum respectively.

On the basis of the returns, this fund seems to be a good investment option in the small-cap equity category.

  1. Aditya Birla Sun Life Small Cap Fund

The fund has performed exceedingly well with 1-year, 3-year and 5-year returns of 8.18%, 20.62% and 27.14% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index are 2.06%, 12.67% and 18.24% per annum respectively.

On a returns based perspective, this fund has performed well and thus the 5-star rating given to it by Groww.

Multi-Cap Funds

These funds invest in companies of all sizes. Multi-cap funds are slightly riskier than large-cap funds but less risky than mid-cap funds.

Some of the funds best avoided in this category are-

Multi Cap Funds to Avoid

  1. LIC MF Multi Cap Fund

LIC MF Multi Cap Fund has had a not-so-desirable performance as the investors and the fund itself would have liked. It’s 1-year, 3-year and 5-year returns are as follows- 4.72%, 4.95% and 11.61%.

Compared to its peer funds in the similar category, the fund has not really delivered expected returns to match up with the High-risk category.

The benchmark index has performed much better with 1-year, 3-year and 5-year returns of 10.52%, 12.00% and 15.08% respectively.

A comparison between these 2 set of returns highlights the consistent under-performance of this fund. For the above reason, the fund is not the best the best option to invest in this fund.

  1. Union Equity Fund

The fund’s 1-year, 3-year and 5-year returns are as follows- 7.10%, 7.91% and 12.76%.

The benchmark index has delivered higher returns with its 1-year, 3-year and 5-year returns of 10.52%, 12.00% and 15.08% respectively.

On this premise, this 1-star rated fund by Groww can be given a miss in the wake of other better opportunities.

Multi Cap funds to Invest In

Some of the funds in the multi-cap category which are good investment options in this category are-

  1. Motilal Oswal Multicap 35 Fund

This fund has been one of the star performers in the multi-cap category. With a strict 35 funds across different categories, this fund has made a mark for itself.

Its 1-year, 3-year are 9.97% and 16.84% per annum respectively. In the same period, the benchmark index has delivered 10.52% and 12.00% respectively.

Investors looking to invest in multi-cap category and taking some risk can consider Motilal Oswal Multicap 35 Fund.

  1. Axis Focused 25 Fund

The fund has performed exceedingly well with 1-year, 3-year and 5-year returns of 21.51%, 18.42% and 19.92% per annum respectively. Corresponding returns for the same period as delivered by the benchmark index are 10.52%, 12.00% and 15.08% per annum respectively.

On a returns based perspective, this fund has performed well and thus the 5-star rating given to it by Groww.

Categories

Different Categories of mutual funds are as follows:

  • Large Cap Funds– In this type of mutual funds, the investment is made in large-cap companies. These companies are stable, have a proven track record and good ratings. These companies have historically given returns between 12% and 18%. Moderate risk is involved and it is suggested to invest in these funds for more than 4 years.
  • Mid Cap Funds– In this type of mutual funds, the investment is made in mid-cap companies. These companies come after large-cap funds in the hierarchy. These companies have historically given returns between 15% and 20%. The risk is slightly more than large-cap funds. It is suggested to invest in these funds for more than 5 years.
  • Small Cap Funds– In this type of mutual funds, the investment is made in small-cap companies. These companies offer 16-22% return. This category is a high risk- high return one.
  • Balanced Fund– This fund is a combination of equity and debt in its portfolio. Depending on the proportion of investment made in equity and debt, the risk and returns are accordingly determined.

If you want to see more funds to invest in 2018, check out: 30 best funds to invest in 2018.

 Conclusion

Risk and returns are 2 sides in the coin named investing. Any investment decision involves risk of the amount invested by the investor. Therefore, it is plain sense to take a careful decision after all due diligence and advice from experts.

Selection of the category is the first step in the process of investing. Factoring in the risk-taking capacity without compromising significantly on the returns is important for each investor.

This article helps investors, both current and potential, to stay away from poor performing funds and identify the good ones.

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.