Long-term investments mainly cater to financial requirements of distant future goals, such as higher education, purchasing a home, retirement, etc. Therefore, investors often invest in long-term mutual funds with an objective of wealth creation. Long-term mutual funds generally work well when you have a horizon of more than 10 years.
Here are some of the main reasons that attract investors to long-term mutual funds:
The benefits of compounding can be generated through long-term mutual fund investments as the earnings that are generated over a period are often reinvested. With the help of a longer investment horizon, investors can maximise returns and investment growth through compounding.
Let’s understand this with an example: Rita invests Rs. 2 lakhs in a mutual fund in year 1 and earns a compound interest of 10% for that year. The principal amount for the second year will therefore be Rs. 2 lakhs + Rs. 20,000 (10% of Rs. 2 lakhs) = Rs 2.2 lakhs. Similarly, the principal amount can keep growing and generate higher returns in the long run.
Whether one invests in debt mutual funds or equities, it is impossible to remain unaffected by market volatilities. However, by investing for a longer term using a systematic approach, the volatilities can be managed as they tend to even out over time.
Here are some of the important points to remember while planning an investment in long-term mutual funds:
Instead of investing in multiple funds that invest in the same kind of securities(stocks, gold, bonds, etc.), explore mutual fund investments that are dissimilar in as far as types of securities, industry or market capitalization is concerned. Diversification helps in spreading the risk across different security types within a single portfolio.
It is important to create a portfolio of investments by gauging personal risk-bearing capacity and keeping in mind specific financial goals. The risk appetite should ideally be as per personal standing and factors such as age can be considered as well.
If an individual is looking to create a corpus for important future goals like marriage, retirement, etc., he/she must limit the equity investments and focus more on debt or fixed income instruments.
Mutual fund investments can either be made through a systematic investment plan (SIP) or a one-time investment (Lump sum). A SIP requires periodic investment, such as daily, weekly, monthly, etc, thereby allowing investors to spread the investment over a longer period. Lump Sum investments are beneficial when the market is not performing well, whereas a SIP investment can be made in both low and high market phases. One can choose the investment route as per income, financial stability, goals, and risk appetite.
While investing for a longer duration, investors must keep a check on the investment. If a fund looks non-promising, he/she may consider opting out of it and rebalancing the portfolio again.
Here are some of the top-performing long-term mutual fund recommendations under following categories:
Mentioned below are some top Nifty index funds in India:
About the fund
L&T Nifty 50 Index Fund belongs to L&T Mutual Fund umbrella. This scheme was launched on 15-Apr-2020. It adopts a passive investment strategy and invests in stocks that comprise the Nifty 50 index.
| Inception Date | April 15, 2020 |
| Benchmark Name | Nifty 50 |
| Fund Manager | Praveen Ayathan |
| Objective | The primary objective is to achieve returns in tandem to the Total Returns Index of Nifty 50 index. The scheme aims to minimise performance difference between its returns and the benchmark index. |
Historical Returns of the Fund (annualised)
| Since Inception |
| 57.82% |
About the fund
This fund is ideal for those investors who are looking for capital growth in line with the index returns. The fund follows passive investment strategy through investment in equity instruments that are part of Nifty 50 Index. It aims to replicate the underlying index of Nifty 50 to minimize the return differential between the fund and index.
| Inception Date | March 06, 2000 |
| Benchmark Name | Nifty 50 |
| Fund Manager | Sharwan Kumar Goyal |
| Objective | The main investment objective of the fund is to invest in stocks comprising Nifty 50 Index and aim to achieve returns that are equivalent to Nifty 50 Index through “passive” investment. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 45.28% | 17.86 | 14.87% | 15.97 | 11.24% |
About Fund
ICICI Prudential Nifty Index Fund – Growth is a passively managed mutual fund that was launched in January 2013. This is rated as a high-risk investment that requires a minimum SIP investment of Rs. 100 and lump-sum investment of Rs.1000. This fund has a large exposure to the banking, software, and petroleum industries. The investments are highly concentrated in large-cap stocks that form part of the Nifty 50.
| Inception Date | January 01, 2013 |
| Benchmark Name | Nifty 50 |
| Fund Manager | Mr Kayzad Eghlim |
| Objective | The objective of the fund is to closely monitor the performance of Nifty 50 and invest in stocks that are part of the index. It does not aim to outperform or underperform the index. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 56.95% | 15.87% | 13.46% | 15.30% | 11.19% |
Mentioned below are some top Sensex index funds in India:
About the fund
HDFC Index fund – Sensex plan is an open-ended scheme that replicates S&P BSE SENSEX Index. The Scheme is passively managed with stock investments in a proportion that is similar to their weightages in the S&P BSE SENSEX Index.
| Inception Date | January 01, 2013 |
| Benchmark Name | S&P BSE SENSEX |
| Fund Manager | Mr. Arun AgarwalMr. Krishan Kumar Daga |
| Objective | To fetch returns that are equivalent to the performance of the S&P BSE SENSEX Index, subject to tracking errors. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 56.06% | 17.20% | 15.32% | 16.59% | 13.47% |
About Fund
ICICI Prudential Sensex Index Fund – Growth is an open-ended fund that tracks and emulates the performance of the S&P BSE Sensex index. This is done through investment in the same stocks that are part of the Sensex index.
| Inception Date | September 21, 2017 |
| Benchmark Name | S&P BSE SENSEX |
| Fund Manager | Mr Kayzad Eghlim |
| Objective | The fund objective is to track and replicate the performance of the S&P BSE Sensex index. This is done primarily by investing in the same stocks which constitute the Sensex index. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 57.53% | 16.32% | 13.92% | 15.75% | 12.99% |
About the fund
This is an open-ended equity scheme tracking S&P BSE Sensex. Tata Index Fund is a passively managed fund that aims to provide returns which closely correspond to the returns of the Sensex. This fund option is rated as very high risk and it requires a minimum SIP investment of Rs. 500. Investors have to make a minimum lump-sum investment of Rs. 5,000.
| Inception Date | January 1, 2013 |
| Benchmark Name | S&P BSE SENSEX TRI |
| Fund Manager | Sonam Udasi |
| Objective | To offer long term capital appreciation by mirroring the S&P BSE Sensex returns by investing in stocks which comprises of S&P BSE Sensex. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 55.40% | 17.29% | 15.48% | 16.51% | 12.97% |
Mentioned below are some details on top performing large-cap mutual funds in India.
About the fund
ICICI Prudential Blue chip Fund is an open-ended large-cap equity fund which offers growth and stability to investor’s portfolios. It focuses investments in blue chip stocks which are diversified across various sectors.
| Inception Date | November 24, 2009 |
| Benchmark Name | Nifty 50 |
| Fund Manager | Jitendra Arora |
| Objective | To provide long-term capital appreciation through an equity portfolio that is mainly invested in large-cap stocks. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 26.59% | 20.08% | 11.68% | 16.74% | 13.43% |
About Fund
Axis Blue chip Fund is an open-ended large-cap equity scheme designed for investors who aim for capital appreciation in the long run. It offers portfolio diversification with a combination of equity and equity-related instruments, predominantly focused on large-cap firms.
| Inception Date | January 1, 2013 |
| Benchmark Name | Nifty 50 Total Return |
| Fund Manager | Shreyash Devalkar |
| Objective | Long-term capital appreciation through portfolio diversification comprising equity and related securities of large-cap firms. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 20.51% | 22.59% | 17.33% | 18.49% | 14.37% |
About the fund
UTI Master Share fund invests in large market capitalisation companies and follows Growth at Reasonable Price (GARP) investment style. This well-diversified portfolio avoids sector and stock concentration. It has had a positive track record in dividend distribution since its inception.
| Inception Date | October 15, 1986 |
| Benchmark Name | S&P BSE 100 |
| Fund Manager | Swati Kulkarni |
| Objective | To achieve long term capital appreciation through investments predominantly in equity and equity related securities of large cap companies. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 19.39% | 16.75% | 9.85% | 13.46% | 10.78% |
Here are the top investment recommendations within mid-cap funds segment:
About the fund
The investment objective of the fund is to generate long-term capital appreciation through investments in equity and equity related securities. The fund focuses investments predominantly in mid-cap companies.
| Inception Date | March 30, 2007 |
| Benchmark Name | Nifty Midcap 100 TRI Total Return Index |
| Fund Manager | Pankaj Tibrewal |
| Expense Ratio | 0.55% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 89.21% | 27.70% | 14.42% | 18.13% | 20.02% |
About the fund
This open-ended scheme aims to generate long-term capital appreciation through investments in equity and equity related securities of Mid-Cap companies.
| Inception Date | January 01, 2013 |
| Benchmark Name | NIFTY Midcap 100 Total Return Index |
| Fund Manager | Harshad Patwardhan |
| Expense Ratio | 0.93% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 86.34% | 28.34% | 12.60% | 18.05% | 20.80% |
About the fund
This is an open-ended equity scheme that predominantly invests in Mid-Cap stocks. The fund is actively managed to ensure that the portfolio is diversified across sectors while keeping the risk well-managed at all times.
| Inception Date | January 02, 2013 |
| Benchmark Name | S&P BSE Mid Cap Total Return Index |
| Fund Manager | Harshad Patwardhan |
| Shreyash Devalkar | 0.50% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 61.22% | 27.41% | 17.92% | 19.26% | 19.59% |
Based on historical performance, here are the top investment options within small-cap funds.
About Fund
SBI Small Cap Fund aims to offer opportunities to investors for long-term growth through investments in a well-diversified basket of equity securities, primarily of small cap companies. It follows a combination of growth and value format of investing and has a bottom-up investment approach for stock selection.
| Inception Date | September 09, 2009 |
| Benchmark Name | S&P BSE Small Cap Index |
| Fund Manager | R. Srinivasan |
| Suitable For | Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 35.57% | 27.16% | 9.53% | 21.43% | 21.68% |
About Fund
The principal objective of Kotak Small cap fund is to generate capital appreciation through investment in various equity & equity related securities of small cap companies. The scheme is designed to offer potential growth benefits offered by small cap securities.
| Inception Date | February 24, 2005 |
| Benchmark Name | NIFTY Smallcap 50 TRI |
| Fund Manager | Pankaj Tibrewal |
| Suitable For | Investors who wish to stay invested for a minimum of 3-4 years and expect very high returns. Also, investors who can bear higher losses. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | 10-Year |
| 47.03% | 33.37% | 13.84% | 20.54% | 17.80% |
About Fund
This is an open-ended equity scheme which primarily invests in small-cap stocks. The primary aim of this scheme is to generate long-term capital appreciation through equity investments in small cap companies. It follows the bottom-up approach of investment.
| Inception Date | November 11, 2013 |
| Benchmark Name | Nifty Free Float Smallcap 100 TRI |
| Fund Manager | Anupam Tiwari |
| Suitable For | Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite. |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 21.53% | 27.43% | 14.92% | 19.07% | 21.99% |
For investors looking to achieve wealth creation, it makes sense to consider investments in long-term mutual funds. These can especially be helpful to meet specific long-term financial goals that may require sufficient funds.
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