Shivani Bhati | Mar 16, 2022 |
Top 10 Best performing Equity Mutual Funds
An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of companies. They are also known as Growth Funds.
Equity Funds are either Active or Passive. In an Active Fund, a fund manager scans the market, conducts research on companies, examines performance and looks for the best stocks to invest. In a Passive Fund, the fund manager builds a portfolio that mirrors a popular market index, say Sensex or Nifty Fifty.
Furthermore, Equity Funds can also be divided as per Market Capitalisation, i.e. how much the capital market values an entire company’s equity. There can be Large Cap, Mid Cap, Small or Micro Cap Funds.
Types of Equity Mutual funds
Equity mutual funds can be differentiated based on:
Though the objective of all equity funds is generally capital appreciation, it is the risk taken to achieve this objective that varies. This further depends upon the types of stocks that the fund invests in. Some types of equity mutual funds based on their investment objective are:
These equity mutual fund schemes invest in companies that rank above 250 in terms of their full market capitalization (as per SEBI guidelines). These funds are considered to be riskier than mid- or large-cap equity funds but can offer the relatively higher returns. Their minimum exposure to such stocks is 65% of the total assets.
These equity mutual fund schemes invest in companies who rank between 101 and 250 by their full market capitalization. These funds are considered to be less risky than small-cap funds, but more than large-cap funds. Their minimum exposure to such stocks is 65% of the total assets.
These equity mutual fund schemes invest in companies who rank between 1 and 100 in terms of full market capitalization. These funds are considered to be the least risky as far as equity fund-picking goes. Their minimum exposure to such stocks is 80% of the total assets.
These equity mutual funds equally divide the allocation between large- and mid-cap equity and related instruments and have the potential to offer high returns. The mandated minimum exposure to both large-cap and mid-cap stocks is 35% each of the total assets.
As an investor, you also need to know the investment strategy followed by the fund house, i.e. the methodology used to select the stocks. The key investment strategies or styles include top-down strategy, bottom-up strategy, value strategy, and growth strategy.
i) Top-down strategy – It means that the sector is chosen first and then the stocks within that sector are purchased in the portfolio.
ii) Bottom-up strategy – It means that well-researched stocks are bought irrespective of the sector.
iii) Growth strategy – It means that the fund will invest in companies that have a consistent track record of profitability and growth and are likely to sustain on this path.
iv) Value strategy – It means that the fund will invest in companies that have the potential to grow exponentially in the future and are currently available at a lower value.
There are a few funds that split the portfolio allocation between predominantly equity (at least 65%) and the rest in debt or between domestic and international equity. It is important to look at asset allocation from a tax-efficiency perspective as per the provisions of the Income Tax Act, 1961. International equity funds that have a predominant foreign equity allocation are classified as debt funds for income tax purposes.
Equity-Linked Savings Schemes (ELSS fund) are a tax-saving mutual fund investment scheme that invest predominantly in equity and equity-related schemes. Under this scheme, the corpus of the investment is invested majorly in equity and the rest in debt related securities. An individual can claim up to Rs. 46,800 (assuming the highest slab of income tax i.e. @30% plus education cess 4%) annually by investing in ELSS funds.
Top 10 Equity mutual Funds of 2022
| Mutual fund | 5 Yr. Returns | 3 Yr. Returns | Min. Investment | Rating | |
|---|---|---|---|---|---|
| 32.84% | 41.28% | ₹5000 | NA | |
| 31.67% | 40.05% | ₹5000 | NA | ||
| 33.13% | 39.8% | — | ||
| 34.23% | 39.65% | — | NA | |
| 33.86% | 38.94% | ₹5000 | NA | |
| 31.82% | 38.44% | ₹1000 | NA | |
| 26.2% | 37.08% | — | NA | |
| 29.59% | 36.92% | — | NA | |
| 22.24% | 36.9% | ₹5000 | ||
| 22.23% | 36.71% | — | NA |
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