Rs 60000 invested in these five funds have already doubled your money in 5 years

A Sharekhan list of top 5 mutual funds has given a CAGR return of 15-18 percent annually which is doubled than what mutual funds gave under the largecap category.

The Indian Mutual Fund industry is going through a very exciting growth phase with the industry assets have doubled over the last 3 years from Rs 9.45 lakh crore in April 2014 to Rs 19.11 lakh crore in April 2017.

“Systematic investment plans (SIPs) have been the preferred route for many investors with the SIP book increasing quite substantially over the last few years, contributing to Rs4,300 crore of inflows every month,” Kaustubh Belapurkar, Director of Fund Research at Morningstar Investment Adviser India told Moneycontrol.

One interesting fact which has come out to light in the last 3-years is that investors have become more mature after burning their hands from global financial crisis back in 2008.

“One interesting trend is that unlike earlier market corrections, in the market correction of Nov’16, significant flows came into equity funds and continued to come in through the months,” said Belapurkar.

This can be attributed to increasing awareness and maturity levels of investors. While largecap funds received the largest absolute inflows, midcap and balanced funds received disproportionately large inflows, suggest experts.

After stellar outperformance in the last three-five years investors are now booking some profits from the midcap category; however, investors who are investing in the midcap themes should not completely move out of these funds.

A repetition of stellar returns might not be possible until earnings catch up as valuations of most of the midcap space have gone above long-term averages.

“Even though we are seeing profit booking is happening on Mid/Micro-cap segment, we suggest not to move out completely. As investments are mostly via the SIP/STP route with investment frame of mostly over 3 years,” Rupesh Bhansali, Head, Mutual funds – GEPL Capital told Moneycontrol.

“Those investors who have completed their 3 years and above and require funds, there we are suggesting to book profits and hold the remaining in the same fund,” he said.

Midcap fund or largecap fund?

The next crucial question in front of investors is to select between investing in a midcap or a largecap fund. Well, that selection should be done depending on the risk appetite of the investor.

They can reduce from the mid/small cap segment and moved to Largecap/flexicap segment if they are risk averse. Or they could maintain exposure in both the categories.

Midcaps have far outperformed largecaps in the past three years. Hence, it would not be surprising if midcaps underperform in the immediate term.

“Shifting of funds - this is more of a portfolio decision and not a fit all advise. Investors with large exposure to midcap funds could shift part of the allocation to largecap funds at the current juncture as a tactical call,” Gaurav Dua, Head of Research, Sharekhan told Moneycontrol.

“Moreover, it is not practically possible to time the markets for retail investor and the investors should leave it to the professional fund manager to do the job for them by taking exposure to a multi-cap or flexi-cap fund,” he said.

Dua further added that investors with limited ability to absorb volatility in the value of their investments should invest in largecap funds or balanced funds rather than relatively riskier midcap/smallcap space.