First the warning, which is so necessary as far as equity mutual fund investments are concerned. Past track record is no indication of future performance. By no means we are recommending to buy these equity mutual funds nor are we saying that they are going to generate the best returns in the future.
5 equity mutual funds with the best 5-year returns
|3-year returns||5-year returns|
|Tata Digital India Fund||43.99%||36.86%|
|ICICI Prudential Technology Fund||45.43%||36.02%|
|Aditya Birla Sun Life Digital India||43.81%||35.10%|
|SBI Technology Opportunities Fund||40.17%||30.65%|
|Franklin India Technology Fund||35.82%||28.32%|
Returns are mostly from technology or IT related funds
As we can see from the above table, almost all are from the IT or the tech pack. In fact, IT stocks have rallied a great deal, which had led to a solid out performance of the stocks from the sector when compared to other sectors.
Having said that we are advising caution as the markets itself are over valued at the current levels and there is a possibility that mutual funds even with the best returns could under perform in the coming days. The performance of mutual funds always rests on the performance of the stock markets and with the sharp rally over the last 1-year, big investors are getting a bit concerned on valuations. Therefore, as the markets rally there might be increasing selling pressure that might emerge and hence caution is warranted even when investing in equity mutual funds.
Recent reports suggested that BlackRock Inc. is trimming its investments in Indian equities and becoming more optimistic on China on attractive valuations amid expectations that policy hurdles will ease next year. Valuations of Indian stocks are leaving investors now worried.
Lumpsum investors can be risky
Goldman Sachs has downgraded Indian equities by one notch to 'market weight', citing a blistering run this year that has made them the best performing emerging Asian market. We have been seeing heavy selling by Foreign Portfolio Investors citing expensive valuations and if the markets fall from the current levels, it would also pull equity mutual fund returns lower.
Investing lumpsum amounts in equities poses a risk and investors are advised to go with the Systematic Investment Plans or SIPs to invest. We have been advocating for a long time now to stay away from lumpsum investments. The Sensex around that 58,600 points mark is certainly not cheap. Investors are therefore advised to be careful and not put big amounts even in mutual funds.
It's also important to diversify your portfolio and include other asset classes in your portfolio. With interest rates slated to rise, there is a possibility that debt may turn attractive once again. Investors can also look at hybrid funds which invest through different asset classes including debt.
Investing in mutual funds is risky. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on this articles. Please consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, and authors do not accept culpability for losses and/or damages arising based on information on GoodReturns.in