Equity Mutual Funds have assets invested into Equities & Equity related instruments of different companies across market capitalisation with an objective of generating higher returns. These Mutual Funds generate higher returns as compared to Debt Funds and Fixed Deposits, however with a long-term horizon.
What is an Equity Mutual Fund?
An equity fund is a mutual fund that primarily invests its assets in shares/stocks of companies. According to the Income Tax Act, an equity fund is defined as a fund that invests at least 65% of its assets in equities. It can invest the balance 0%-35% in debt and money market securities. Market-linked equity funds have the potential of giving inflation-beating returns a moderate to high amount of risk.
Best 5 Equity Mutual Funds in India 2020
Here is a list of five best equity mutual funds which can be considered for investments in 2020:
|Fund Name||AUM (Crs.)||3-Year Returns||5-Year Returns||Link|
|Mirae Asset Emerging Bluechip Fund||Rs.9,516||17.38%||16.07%||Invest Now|
|Axis Long Term Equity Fund||Rs.21,473||18.07%||11.37%||Invest Now|
|Mirae Asset Large Cap Fund||Rs.16,873||15.48%||11.60%||Invest Now|
|SBI Small Cap Fund||Rs.3,156||16.34%||14.64%||Invest Now|
|Axis Focused 25 Fund||Rs.9,110||19.50%||13.12%||Invest Now|
(Data as on 23rd January 2020; Source- Value Research)
1. Mirae Asset Emerging Bluechip Fund
As a large and mid cap fund, Mirae Asset Emerging Bluechip Fund invests 35-65% in large cap companies and 35-65% in mid cap companies. The fund managers have used value investing strategies to invest in growth oriented businesses up to a reasonable price and hold the same over a longer period of time.
|Returns||1-Year Returns||3-Year Returns||5-Year Returns|
If you would have invested Rs.2,00,000 in this fund for 5 years, the accumulated corpus would be Rs.4,21,337 (Considering 16.07% CAGR as on 23rd January)
- The fund has enjoyed a stellar performance over it’s peers and has also performed consistently over the benchmark
- There are 59 stocks in the fund’s portfolio with primary investments into Finance, Healthcare, Energy, FMCG and Technology sectors. Also, the top issuers include HDFC Bank, ICICI Bank, State Bank of India, Reliance Industries and Larsen & Toubro
- The fund has a healthy mix of large and medium sized companies which brings flexibility in the hands of the fund managers to invest in businesses where maximum gains are expected
- It is a suitable investment option for the investors who are willing to place their funds for a longer duration (more than 5 to 7 years)
2. Axis Long Term Equity Fund
It is an open-ended equity scheme which aims at generating long term capital appreciation. Being an Equity Linked Savings Scheme (ELSS), It comes with a statutory lock-in of 3 years and tax rebate.
|Returns||3-Year Returns||5-Year Returns|
If you would have invested ₹1,00,000 in this fund 7 years ago, the accumulated corpus would have been ₹2,51,121 (Considering 20.22% CAGR, as of January 23, 2020)
- The fund’s portfolio has a balance between large and mid cap allocations, thereby offering appropriate diversification to the investor
- Long term growth prospects and quality are the key criteria while selecting stocks for investment
- Under Jinesh Gopani, who has 18 years of professional work experience, the fund has witnessed exponential growth and the future prospects look attractive
- Investment in this fund can be made with a minimum amount of ₹500 (both for lumpsum and SIP mode of investment)
3. Mirae Asset Large Cap Fund
Mirae Asset Large Cap Fund Growth is an Equity Mutual Fund from the Mirae Asset Mutual Fund house. It allocates the assets in equity securities of large cap companies to foster significant wealth creation in the long run. As the asset allocation is inclined towards Large Cap (more than 80%), the portfolio is stable against market volatility.
|Returns||1-Year Returns (%)||3-Year Returns (%)||5-Year Returns (%)|
If you would have invested Rs.1,00,000 in this fund for 5 years, the accumulated capital would have been Rs.1,73,109 (Considering 11.60% CAGR as on 23rd January)
- According to the trailing returns, this fund has clearly outperformed its benchmark over 1 year, 3 year and 5 year periods
- The fund has about 15% of the total assets allocated into mid cap companies which means there is consistency of large cap funds with few conviction of mid cap
- It is quite flexible when it comes to investment across sectors and themes. The top 5 sectors of allocation are Banks, Software, Petroleum Products, Consumer Non Durables and Finance
- This can be the best equity mutual fund for investors who are willing to place their funds in stocks of big companies, which tend to fall less during market distortions, for a longer period of time can
4. SBI Small Cap Fund
The fund primarily invests in small cap stocks (minimum 65%) to provide the investors with long term growth opportunities. Up to 35% of the assets are exposed to other equities (Large/Mid Cap) or debt and money market instruments, thereby offering a certain degree of diversification.
|Returns||1-Year Returns||3-Year Returns||5-Year Returns|
If you would have invested Rs.2,00,000 in this fund for 5 years, the accumulated corpus would have been Rs.(Considering the 14.64% CAGR, as on 23rd January)
- The fund manager has followed a blend of growth and value investing strategies and bottom-up investment approach for stock selection
- The fund’s portfolio has 48 stocks concentrated in the Engineering, FMCG, Financial and Construction sector. Also, Dixon Technologies, Hawkins Cookers, JK Cement and Hatsun Agro Products are some of the top issuers in this fund
- Investors must keep their funds invested for at least 7 years to get desirable returns
- If you are an investor who believes in the market wisdom of high risk fetching higher returns, then SBI Small Cap Fund is one that you may consider investing in the long term
5. Axis Focused 25 Fund
By investing in equity and equity related securities of up to 25 companies, Axis Focused 25 Fund generates long term capital appreciation for the investors. The management has focused on companies that have the potential to sail through market turbulences and give inflation beating returns.
|Returns||1-Year Returns||3-Year Returns||5-Year Returns|
If you would have invested Rs.3,00,000 in this fund for 5 years, the accumulated corpus would have been Rs.5,55,671(Considering the 13.12% CAGR, as on 23rd January)
- The fund’s portfolio is well diversified across sectors such as Finance, Consumer Goods, IT, Automobile and Energy to manage market risk
- Since it is a multi-cap fund, the fund managers are rendered with a certain degree of flexibility to allocate assets in companies of different sizes, to get maximum gains. The top 5 issuers are Bajaj Finance, Kotak Mahindra bank, Bajaj Finserv, HDFC Bank and Avenue Supermarts
- Investors with long term goals such as Child’s education, retirement etc. can choose this fund
Advantages of investing in Equity Mutual Funds
Here are some advantages of investing your resources into Equity Funds:
- Tax Benefits: According to the Section 80C of the Income Tax Act of 1961, Equity Linked Saving Schemes (ELSS) are the tax-saving investment that gives enough equity exposure to the investors. SIP of Lumpsum investments are locked-in for 3 years but investors get a tax deduction in the financial year the invest in for up to Rs 1.5 lakh
- Low Investment Costs: Individuals can start their investments in equity funds with a nominal cost of Rs.500 per month via Systematic Investment Plan (SIP). Moreover, the Securities & Exchange Board of India (SEBI) has regulated a maximum 2.5% expense ratio on equity funds which is going to be reduced in the near future
- High Wealth Accumulation: Investments made into equities & equity related instruments are known for delivering high inflation beating returns. As the price of stocks rise, the value of investment also appreciates. With these funds, investors get a good opportunity of rapid wealth creation
- Diversified Portfolio: The investments are exposed to various stocks across market capitalisation which reduces the risk of losses. Having diversified stocks in the portfolio helps the fund sail through market fluctuations smoothly. During bearish market situations, even if some stocks undergo depreciation, the stocks outperforming make up for the losses
- Professional Management: Each and every fund (except index funds and Exchange Traded Funds) has a qualified manager who performs research on different stocks, undergoes crucial portfolio planning to make sure the assets are invested in a way that delivers maximum returns
- Liquidity: Redemption of units of mutual funds is very easy and convenient. When in need, the investors can redeem their share of units and the corpus gets credited to the respective bank account within a week. This does not hold true for ELSS ones, however.
How to invest in Equity Funds
There are different methods through which one can invest in equity funds:
- Offline mode– Visiting the nearest branch office of the fund house and investing in the desired scheme. You must carry all the required documents such as Identity Proof, Address Proof, Cancelled Cheque, Passport size photos, PAN Card and KYC Documents handy. You can also invest offline through a broker. However, this would then be a regular fund and not a direct fund. Think of it like a charge brokerage which gets deducted from the total investment amount
- Online Portal– If you want a hassle free mode of investing with no commissions and brokerage, you can choose websites like Paisabazaar.com which allow the investors to compare more than 1,700 funds at one platform instead of visiting the website of each AMC and then searching for numerous funds. You can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment
Frequently Asked Questions
Q.1: Where can I find Equity mutual funds to invest in?
Ans: You can log into platforms such as Paisabazaar which gives you a detailed and analysed view of equity funds. On Paisabazaar.com, start a direct search for Equity Funds after which you will be redirected to a complete list of suitable funds. You can compare different funds to get the best returns.
Q.2: How to check the Net Asset Value of a fund?
Ans: The Net Asset Value (NAV) of the fund can be determined by deducting the liabilities involved. NAV can be checked on the domain of the fund itself or on other finance related websites such as Paisabazaar.
Q.3: How much should one invest in equity oriented schemes?
Ans: You don’t need a lot of money to invest in Mutual Funds as investments can be made with a minimum amount of Rs.500 in most equity funds. However, how much one should invest in equity oriented schemes is directly linked to the particular investment goal of the individual. For example, if someone wants to invest for a longer period of time and get higher returns, he should invest into Equities. Other factors that influence the investing strategy are- Financial Goal, Risks Involved, Fund Selection etc.
Q.4: How do I choose the best equity mutual fund?
Ans: There are numerous Equity Funds which make the investing decision difficult. However, to choose the best equity mutual fund, you can focus on some basic factors such as- Expense Ratio, Financial Goal, Risk Tolerance and Risk Involved, High Turnover Ratios, Assets Under Management (AUM), Net Asset Value etc. These factors help the investors in evaluating the fund’s ability to perform during market fluctuations.
Q.6: Which is the best equity for SIP?
Ans: There are a lot of funds which have performed beneficially for the investors in 2019 such as ICICI Prudential Bluechip Fund, DSP Tax Saver Fund etc. However, different investors with different goals prefer different amounts and frequencies of SIPs according to their financial goals and the historical returns accrued by the fund. Click here to get a better understanding of SIPs: BEST SIP 2019