15 Mutual Fund Wealth-Creators
How many times you have experienced that, while having your lunch or dinner in a restaurant, even if the starters and main course were not so impressive, if the dessert was awesome, you are more likely to assign a better rating to the restaurant. This happens with most of us because the conditioning of our brain is such that it is the last experience that matters the most in your future decision making.
The same thing happens to your investment decision also. The latest returns or performance of an asset class determines how you view its future returns and whether you should invest or avoid investing in it. The equity market and its corollary the equity mutual funds have generated—most of them, if not all— negative returns in the last one year. This has led many of you to tighten your purse strings and moderate your investments in mutual funds. Currently, the inflows into the equity funds are at two-year low, which stands testimony to the slowdown. However, if you overcome this bias, you can see the clear picture and can make a rational investment decision. The mutual funds have generated one of the best returns for their investors in the long run. For example, SBI Small Cap Fund in the last five years ending December 2018 has generated annualised return of almost 30%. What this means that if you had invested Rs. 1 lakh at the start of 2014, it would have become Rs. 3.69 lakh at the end of 2018, almost 3.7 times your original investment. This despite the year 2018 being one of the worst years for small-cap companies and mutual funds since 2008. This fund alone had witnessed a fall of 16 per cent in 2018. Therefore, we can see that mutual fund investments in the long term generate wealth for their investors.
In the following pages, we are listing down the top 5 funds in terms of returns from each major equity fund category, namely, large-cap, mid-cap and small-cap. To arrive at this list, we have considered the change in NAV in the last five years ending December 2018. Our analysis of historical returns shows that small-cap funds have generated the best returns in the last five years, followed by the mid-cap and large-cap funds. This was even after 2018 being a good year for the large-cap funds as, on an average, these funds created positive returns.
These are not our recommended list of schemes and the usual disclaimer of 'past returns may not be repeated in future' applies to these funds also.
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