Invest in Top Mutual Funds In 2022: High Return Mutual Funds In India
In the last couple of years, mutual funds have attracted a lot of retail investors. Due to the ongoing stock market bull run, in the last couple of years, most equity mutual funds have given good returns to their investors. This article will explain how to invest in top mutual funds in 2021. Let us start with the basic introduction to mutual funds, then move on to the types of mutual funds, and finally, we will see how the best mutual funds performed in 2021.
Introduction to mutual funds
For a retail investor, mutual funds are one of the best investment options to achieve their financial goals. A mutual fund pools money from investors and invests it on their behalf. Investors are allotted the scheme units in return for their investment. Based on the financial performance of the underlying securities, the net asset value (NAV) of the units moves up and down. The returns earned by investors depend on the movement of the NAV. In the last couple of years, equity mutual funds have created good wealth for their investments.
Mutual funds by market capitalisation
Based on market capitalisation, SEBI has classified mutual funds into:
Large-cap mutual funds:
- They invest a minimum of 80% of their total assets in equity and equity-related instruments of large cap companies (1st-100th companies in terms of full market capitalisation).
Mid-cap mutual funds:
- They invest a minimum of 65% of their total assets in equity and equity-related instruments of mid cap companies (101st-250th companies in terms of full market capitalisation).
Small-cap mutual funds:
- They invest a minimum of 65% of their total assets in equity and equity-related instruments of small cap companies (251st company onwards in terms of full market capitalisation).
List of mutual funds by market capitalisation
|Scheme name||AUM (Rs. crores)||1-year returns|
|Large cap mutual funds|
|Invesco India Largecap Fund||427||33.80%|
|Tata Large Cap Fund||1,074||33.56%|
|Franklin India Bluechip Fund||6,620||33.47%|
|Mid cap mutual funds|
|PGIM India Midcap Opportunities Fund||3,584||65.12%|
|Baroda Mid-cap Fund – Plan B||87||57.43%|
|Motilal Oswal Midcap 30 Fund||2,505||57.36%|
|Small cap mutual funds|
|L&T Emerging Businesses Fund||7,685||77.33%|
|Principal Small Cap Fund||512||76.22%|
|Nippon India Small Cap Fund||17,554||73.44%|
The above returns are as of 27 December 2021. The funds have been ranked based on 1-year returns. The returns are for direct plans with growth options.
List of mutual funds by diversification
Apart from large, mid, and small-cap mutual funds, an investor can choose to invest in even more diversified funds. We have multi-cap and Flexi-cap mutual fund schemes in this category. A multi-cap fund has to invest a minimum of 75% of its total assets in equity and equity-related instruments in the following manner:
- A minimum of 25% of total assets in equity and equity-related instruments of large cap companies
- A minimum of 25% of total assets in equity and equity-related instruments of mid cap companies
- A minimum of 25% of total assets in equity and equity-related instruments of small cap companies
Some examples of multi-cap funds include:
- Nippon India Multicap Fund
- Principal Multi Cap Growth Fund
- Invesco India Multicap Fund
A Flexi-cap mutual fund has to invest a minimum of 65% of its total assets in equity and equity-related instruments. The fund manager can choose to invest across large, mid, and small-cap stocks without any restrictions.
Some examples of flexi-cap funds include:
- BOI AXA Flexi Cap Fund
- Parag Parikh Flexi Cap Fund
- PGIM Flexi Cap Fund
List of mutual funds by sectors and themes
In the above section, we have seen mutual funds based on market capitalisation. In this section, we will learn about sectoral and thematic mutual funds. A sectoral mutual fund invests in companies belonging to a particular sector like banking, IT, FMCG, etc.
Some examples of sectoral funds include:
- Invesco India Infrastructure Fund
- SBI Healthcare Opportunities Fund
- Nippon India Pharma Fund
- ICICI Prudential Commodities Fund
A thematic mutual fund invests in companies with a particular theme like rural, digital, Gen Next, Ethics, etc.
Some examples of thematic funds include:
- Sundaram Rural and Consumption Fund
- Tata Digital India Fund
- Aditya Birla Sun Life India GenNext Fund
- Tata Ethical Fund
Top performing mutual funds in 2021
In the above sections, we have understood the various equity mutual fund schemes categories. Now let us look at the best performing equity mutual fund schemes of 2021.
(Direct plan - Growth Option)
|Quant Small Cap Fund||1,270||86.33%|
|Quant Infrastructure Fund||239||83.61%|
|Sundaram Long Term Micro Cap Tax Advantage Fund||39||78.57%|
|L&T Emerging Businesses Fund||7685||75.46%|
|ICICI Prudential Technology Fund||7,386||74.58%|
How to invest in mutual funds?
To start investing in mutual funds, first, you need to list your financial goals and quantify them. The next step is to do your risk assessment and decide your asset allocation accordingly. You can then start investing in mutual funds. You can either invest a lump sum or start a systematic investment plan (SIP). With a SIP, you get the Rupee Cost Averaging benefit. When the market goes up, the value of your portfolio goes up. And, when the market is going down, you accumulate more units every month. You create wealth that can help you accomplish your financial goals in the long run.
While investing in equity mutual funds, you have a lot of options. To start with, you can choose to invest either in active funds or index funds. Within active and index funds, you can choose to invest in large, mid, or small cap funds. You can also choose to invest in sectoral or thematic mutual funds. By building an investment portfolio with a mix of active/passive funds, market capitalisation funds, sectoral/thematic funds, etc., you can build a well-diversified portfolio that can help you accomplish your financial goals.
To read more on mutual fund investing: