Best Long-Term Mutual Funds

  • Finity Research
  • Jun 09 2021
  • 12 minutes
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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. 

Why invest In Long-term Mutual Funds?

Here are some of the main reasons that attract investors to long-term mutual funds:

Compounding Benefit

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.

Risk Mitigation

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.

How to plan long-term mutual fund investments?

Here are some of the important points to remember while planning an investment in long-term mutual funds:

Portfolio Diversification

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.

Measure Risk Appetite and Financial Goals 

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.

Lumpsum Investment Vs SIP

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.

Regular Portfolio Review and Rebalance

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.

Which are the Best Long-Term Mutual Funds in India?

Here are some of the top-performing long-term mutual fund recommendations under following categories:

  1. Nifty Index Funds
  2. Sensex Index Funds
  3. Large Cap Funds
  4. Mid Cap Funds
  5. Small Cap Funds

Mentioned below are some top Nifty index funds in India:

L&T Nifty 50 Index Fund – Growth – Direct Plan

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 DateApril 15, 2020
Benchmark NameNifty 50
Fund ManagerPraveen Ayathan
ObjectiveThe 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%

UTI Nifty Index Fund – Growth

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 DateMarch 06, 2000
Benchmark NameNifty 50
Fund ManagerSharwan Kumar Goyal
ObjectiveThe 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-Year2-Year3-Year5-Year10-Year
45.28%17.8614.87%15.9711.24%

ICICI Prudential Nifty Index Fund – Growth

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 DateJanuary 01, 2013
Benchmark NameNifty 50
Fund ManagerMr Kayzad Eghlim
ObjectiveThe 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-Year2-Year3-Year5-Year10-Year
56.95%15.87%13.46%15.30%11.19%

Mentioned below are some top Sensex index funds in India:

HDFC Index Fund – Direct Growth – Sensex Plan

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 DateJanuary 01, 2013
Benchmark NameS&P BSE SENSEX
Fund ManagerMr. Arun AgarwalMr. Krishan Kumar Daga
ObjectiveTo 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-Year2-Year3-Year5-YearSince Inception
56.06%17.20%15.32%16.59%13.47%

ICICI Prudential Sensex Index Fund – Direct Growth

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 DateSeptember 21, 2017
Benchmark NameS&P BSE SENSEX
Fund ManagerMr Kayzad Eghlim
ObjectiveThe 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-Year2-Year3-Year5-YearSince Inception
57.53%16.32%13.92%15.75%12.99%

Tata Index Fund – SENSEX – Direct Plan

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 DateJanuary 1, 2013
Benchmark NameS&P BSE SENSEX TRI
Fund ManagerSonam Udasi
ObjectiveTo 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-Year2-Year3-Year5-Year10-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.

ICICI Prudential Bluechip

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 DateNovember 24, 2009
Benchmark NameNifty 50
Fund ManagerJitendra Arora
ObjectiveTo provide long-term capital appreciation through an equity portfolio that is mainly invested in large-cap stocks.

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-Year10-Year
26.59%20.08%11.68%16.74%13.43%

Axis Blue chip

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 DateJanuary 1, 2013
Benchmark NameNifty 50 Total Return
Fund ManagerShreyash Devalkar
ObjectiveLong-term capital appreciation through portfolio diversification comprising equity and related securities of large-cap firms.

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-Year10-Year
20.51%22.59%17.33%18.49%14.37%

UTI Master Share

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 DateOctober 15, 1986
Benchmark NameS&P BSE 100
Fund ManagerSwati Kulkarni
ObjectiveTo 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-Year2-Year3-Year5-Year10-Year
19.39%16.75%9.85%13.46%10.78%

Here are the top investment recommendations within mid-cap funds segment:

Kotak Emerging Equity Scheme 

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 DateMarch 30, 2007
Benchmark NameNifty Midcap 100 TRI Total Return Index
Fund ManagerPankaj Tibrewal
Expense Ratio0.55%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-Year10-Year
89.21%27.70%14.42%18.13%20.02%

Edelweiss MidCap Fund

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 DateJanuary 01, 2013
Benchmark NameNIFTY Midcap 100 Total Return Index
Fund ManagerHarshad Patwardhan
Expense Ratio0.93%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-Year10-Year
86.34%28.34%12.60%18.05%20.80%

Axis Midcap Fund

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 DateJanuary 02, 2013
Benchmark NameS&P BSE Mid Cap Total Return Index
Fund ManagerHarshad Patwardhan
Shreyash Devalkar0.50%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-Year10-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.

SBI Small Cap Fund Regular Plan-Growth

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 DateSeptember 09, 2009 
Benchmark NameS&P BSE Small Cap Index
Fund ManagerR. Srinivasan
Suitable ForInvestors 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-Year2-Year3-Year5-Year10-Year
35.57%27.16%9.53%21.43%21.68%

Kotak Small Cap Growth

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 DateFebruary 24, 2005
Benchmark NameNIFTY Smallcap 50 TRI
Fund ManagerPankaj Tibrewal
Suitable ForInvestors 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-Year2-Year3-Year5-Year10-Year
47.03%33.37%13.84%20.54%17.80%

Axis Small Cap Fund Growth

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 DateNovember 11, 2013
Benchmark NameNifty Free Float Smallcap 100 TRI
Fund ManagerAnupam Tiwari
Suitable ForInvestors 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-Year2-Year3-Year5-YearSince Inception
21.53%27.43%14.92%19.07%21.99%

Conclusion

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.

FAQs on long term mutual funds

  1. Are mutual funds good for long term investing?
    Index funds and equity funds are often considered as good investment options for long-term investment goals. These tend to perform well in the long run and require investors to remain invested for a longer time horizon for maximum benefits.
  1. In which mutual fund should I invest for the long term?
    It is best to consider investing in either index funds or equity mutual funds if you are looking for a long-term investment option. Basis individual risk appetite and specific financial goals, you can choose from the top performing funds within these categories.
  1. Is mutual fund safe for long term?
    Mutual funds are ideal for investors who do not have knowledge of the markets or portfolio management. These are mostly professionally managed and come with the benefit of selecting between different investment categories as per individual goals.
  1. Why are mutual funds considered good investments for long-term investors?
    Long-term investors who can keep their funds invested for a longer time horizon can benefit from mutual funds since these are actively managed by professionals who can work on the risk-return profile of the portfolio to maximise returns.
  1. How to invest in long-term mutual funds?
    Investors can invest in long-term mutual funds using the Finity app. This app provides the convenience of investing through smartphones by selecting some of the best rated funds across various mutual fund investment categories.
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