Wealth Sips

Three Dilemmas at Present: What to Do, Where to Invest & How Much?

Best Mutual Funds to invest in 2021

As we enter the new financial year, the memories of a very different and challenging previous year came back due to concerns over surging Covid cases again. While the second wave of Covid-19 is causing some nervousness among investors, the stock market continues to remain firm at present. Such scenarios are always testing times for investors and create a dilemma of what should you do with your investment. We would like to solve this problem for you by sharing our views on three of the most important questions that are probably going in your mind at present related to your investment.

What should you do with your existing equity mutual funds?

Most of us continue to hold investment in equities directly or through equity mutual funds. In our view, you should continue to hold on with your equity investments even though the markets continue to surge. If you had invested at same time last year in equity mutual funds, the return on these investments may tempt you to book profits, the return from equity funds in last one year ranges from 50% to more than 100% depending on the funds you invested in. We suggest you hold on with those investments along with your other long term equity investments because you did the right thing by investing when the markets were falling. Now you should give it time to deliver better results for you over a period. You should only redeem if you are nearing your financial goal, else remaining invested at present will work for you.

What strategy should you follow for new investment

While there exist some sort of uncertainty which can result in volatile markets, it would be a better strategy to invest in a gradual manner at present if you have any investible surplus. Let say you have Rs.100 of lumpsum money to invest in equities at present, we suggest you to invest Rs.40 at present in one go and remaining Rs.60 can be invested over next 6 months through SIPs of Rs.10 each month. You should continue with your existing SIPs and should not pause or stop it because of market conditions.

Which equity funds you can look at investing in at present

While 1 year performance of all equity funds looks attractive at present, but that certainly cannot be the benchmark for deciding which funds are good to invest. There are more than 350 equity funds which ones can you consider investing in. To make your life easy, we have selected few funds from different categories based on multiple qualitative and quantitative parameters across different market cycles through 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
Canara Robeco Bluechip Equity Fund 70.95% 17.23% 16.58%
Axis Bluechip Fund 56.02% 16.49% 16.56%
Mirae Asset Large Cap Fund 76.00% 13.74% 16.30%

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 * 93.01% 18.53% 21.60%
Canara Robeco Emerging Equities Fund 79.70% 13.08% 18.15%
Kotak Equity Opportunities Fund 78.71% 14.00% 16.24%
* New SIPs of upto Rs.2,500 per month are permitted in this fund. SIPs of existing investors will continue as per their registered SIP amount.

Flexi Cap

Flexi Cap 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 Flexi Cap Fund 85.90% 19.71% 18.01%
UTI Flexi Cap Fund 89.71% 18.50% 17.30%
SBI Focused Equity Fund 60.46% 13.00% 15.87%

Mid Cap Fund

Mid Cap Funds 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 71.47% 18.02% 18.92%
DSP Mid Cap Fund 77.39% 12.15% 16.96%
Invesco India Midcap Fund 79.78% 14.35% 16.75%

Small Cap

Small Cap Funds invest in small-sized companies often at nascent stage. High growth potential with very high risk, extremely volatile across market cycles

Funds 1 Year Return 3 Year Return 5 Year Return
SBI Small Cap Fund 99.90% 13.62% 20.69%
Kotak Small Cap Fund 132.89% 16.01% 18.39%
Axis Small Cap Fund 85.26% 17.17% 18.37%

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
Mirae Tax Saver Fund 93.44% 17.95% 21.46%
Axis Long Term Equity Fund 65.05% 14.97% 16.05%
Invesco India Tax Plan 73.26% 13.02% 15.21%

You can invest in above funds from different categories based on your risk appetite and time horizon. At present investing in a gradual manner can work better for you if you are planning to do lumpsum or one-time investment. Equity funds are meant for long-term investing and you can expect better results from it when you hold it for long term.

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

All Returns shown above are annualized return as on 1st April 2021. All fund tables are sorted in descending order based on the 5 years return.