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Best Mutual Funds to invest in 2021

Best Mutual Funds to invest in 2021

As the turbulent 2020 comes to a close, the world can put a truly eventful year behind and look ahead to a future without masks, gloves and social distancing and go back to the regularly scheduled program of flights, vacations and regular office instead of work from home.

2020 has been a challenging year for the Fund Management fraternity too. The BSE SENSEX has been extremely volatile throughout the year, from the highs of January (around the 41,900 mark) to the lows of March (25,900) and then surpassing the January level in November (46,600+ at the time of writing this article), it has truly been a roller-coaster ride for everyone in the markets in 2020.

The year has helped us to look at funds from two very important perspectives.

  • How the funds did during market correction (Jan 17, 2020 to Mar 23, 2020)
  • How the funds are doing during the recovery stage (Mar 24, 2020 onwards)

Usually the fall and recovery of any stock market is not that quick and takes more time but in 2020, we all witnessed the challenges and opportunities throughout the year. This not only gave us insights on the performance of the funds, but also on the quality and characteristics of the portfolio along with fund managements skills that were tested during this period; across the industry.

Equity Funds to look for in 2021

Below are well researched Equity Funds that you can consider investing in for the long term. These equity funds are based on multiple qualitative and quantitative parameters across different market cycles as per our research process.

Large Cap Funds

Large Cap Funds invest in well-established and big companies also known as Bluechip stocks. The aim is to generate steady capital appreciation with less volatility.

Funds 1 Year Return 3 Year Return 5 Year Return
Axis Bluechip Fund 16.66% 14.49% 15.14%
Canara Robeco Bluechip Equity Fund 20.28% 13.56% 14.44%
Mirae Asset Large Cap Fund 12.13% 8.56% 13.95%

Index Funds

Index Funds replicate the benchmark and invest in the same companies as per its benchmark and also follows the same weightage.

Funds 1 Year Return 3 Year Return 5 Year Return
UTI Nifty Index Fund 13.14% 10.80% 13.11%
HDFC Index Fund Nifty 50 12.78% 10.60% 12.92%

Large & Mid Cap Funds

Large & Mid Cap Funds invest in bluechip and aggressive medium-sized companies. Potential to generate higher return with additional risk of mid cap.

Funds 1 Year Return 3 Year Return 5 Year Return
Mirae Asset Emerging Bluechip Fund * 21.49% 10.32% 17.49%
Canara Robeco Emerging Equities Fund 22.69% 7.71% 13.87%
Kotak Equity Opportunities Fund 16.54% 8.13% 13.30%
* New SIPs of upto ? 2,500 per month are permitted in this fund. SIPs of existing investors will continue as per their registered SIP amount.

Multi Cap / Flexi Cap

Multi Cap / Flexi Cap# / Focused Funds invest across large, mid & small sized companies. Covers the overall potential of stock markets due to the flexibility to invest depending on opportunities.

Funds 1 Year Return 3 Year Return 5 Year Return
Parag Parikh Long Term Equity Fund (Parag Parikh Flexi Cap Fund w.e.f. January 21, 2021) 31.38% 14.18% 14.98%
UTI Equity Fund 28.82% 14.75% 14.61%
SBI Focused Equity Fund 14.89% 9.30% 13.95%

Mid Cap Fund

Mid Cap Fund - Invest in medium-sized companies that have the potential to grow faster. Good for investors with a high-risk taking ability because of volatility during tough market conditions

Funds 1 Year Return 3 Year Return 5 Year Return
Axis Mid Cap Fund 23.93% 13.37% 14.86%
DSP Mid Cap Fund 24.45% 7.60% 14.00%
Kotak Emerging Equity Fund 22.89% 6.57% 13.59%

Tax Saver Funds (ELSS)

Tax Saver Funds invest across large, mid & small sized companies and help you save tax under section 80C. These funds have a lock-in period of 3 years.

Funds 1 Year Return 3 Year Return 5 Year Return
Axis Long Term Equity Fund 18.59% 12.41% 14.26%
Invesco India Tax Plan 16.31% 8.67% 12.50%
Mirae Tax Saver Fund 19.60% 10.80% -

We recommend limiting the allocation in a fund to around 15% of your overall investment, which means that you need to diversify your investment across at least 8 of these funds. Ideally, you should diversify across different fund houses to avoid the risk of investing too much in any fund house.

A right blend of funds from Large Cap, Multi Cap / Flexi Cap, Large & Mid Cap should have maximum allocation in overall investment. Mid Cap funds can be around 10% - 25% depending on your risk profile and investment period. Higher the risk profile and investment period, higher can be the allocation in Mid Cap Funds (max 25%). Small Cap Funds should only be considered by aggressive investors who are willing to take extreme risk on their investment.

To know more about which funds are right for you get in touch with us!

All Returns shown above are annualized return as on 18 Dec 2020. All fund tables are sorted in descending order based on the 5 years return.
# The Flexi Cap category will be enforced from 21 Jan 2021.