Mutual funds have gained huge popularity among retail investors over the last few years. Compared to traditional investment options like fixed deposits, recurring accounts, etc. The best mutual fund for long term delivers much higher returns. The best thing is that you don’t need to invest a lump sum in a mutual fund. According to your convenience, you can invest in a SIP in monthly instalments. Are you looking for the best long-term mutual fund options in India? Here is everything you need to know.
Benefits of Investing in Long-Term Mutual Funds
There are numerous reasons to start investing in long-term mutual funds:
- Build Wealth over Time: As the value of your holdings increases, you get higher SIP returns and build wealth over time. The profit adds up to your savings, ensuring greater financial security and helping you fulfil goals like education, retirement planning, real estate, etc.
- Diversify Your Portfolio: Investing in mutual funds diversifies your portfolio with different types of funds like debt, equity, etc. While some are more volatile than others, all of them offer different rewards.
- Liquidity: Mutual funds and SIPs are highly liquid, making them extremely easy to purchase and sell. They have ample sellers and buyers in the market, compared to less liquid assets like real estate.
- Flexibility: You can start investing small amounts and gradually build up the portfolio. Small and mid-cap companies have more growth potential and can provide higher SIP returns. Rather than investing in a lump sum, you can invest at your convenience in a more customizable and flexible way through SIPs.
Factors to Consider When Choosing a Long-Term Mutual Fund
Here are a few crucial factors you must consider before finalising a long-term mutual fund scheme to invest in:
- Investment Horizon: Assess the mutual fund’s maturity profile and align your investment horizon accordingly. Longer durations require more patience and commitment, making them more suitable for investors with a long-term outlook.
- Interest Rate: Since long-term mutual fund returns are highly sensitive to market changes, evaluate the fund’s current and predicted interest rates to measure returns. Declining rates lead to potential gains, while increasing rates result in the risk of price declines.
- Expense Ratio: Compare different funds’ expense ratios, as a lower expense ratio will enhance the total SIP returns, particularly for long-term mutual fund schemes.
- Credit Quality: Assess the underlying bond’s creditworthiness to determine its risk of default. It may impact the overall returns and stability of your investment.
- Diversification: Ensure the fund invests in diverse sectors to balance the portfolio and reduce concentration risk.
- Fund Manager Expertise: Research and evaluate the fund manager’s experience and track record. Their decision-making skills are crucial to managing the fund’s portfolio and generating expected returns.
Best-Performing Long-Term Mutual Funds
Here is a look at some of the best-performing long-term mutual funds in India:
Axis Bluechip Fund Direct-Growth
Launched by Axis Mutual Fund, this growth plan has performed exceptionally well over the last five years. The fund invests in equity and related instruments of large-cap companies to generate long-term capital growth with a diverse portfolio.
SBI Bluechip Mutual Fund
Launched by SBI Mutual Fund in 2013, it is a large-cap equity fund encouraging investors for long-term capital appreciation. With a diverse investment portfolio, it channels its investments in equity stocks of large-cap companies. As a result, it is the best mutual fund for the long term with the least risk involved.
Aditya Birla Sun Life Small Cap Fund
Launched in 2013, it is a popular mutual fund among small and mid-cap categories. The fund accumulates capital growth by mainly investing in equity and related instruments of small and mid-cap companies. The best thing is that it is an open-ended fund with a minimum investment of ₹ 1,000. The fund is highly volatile in nature, with higher returns. However, while investing for the long term, you must focus on long-term goals and returns.
Investing in mutual funds for the long term is beneficial, but picking the right fund is crucial. Are you wondering which is the best mutual fund for the long term? Evaluate your investment horizon and risk appetite to make an informed decision. Assess all aspects and go ahead to open a Demat account to begin your investment endeavor.