These mutual funds consistently deliver strong returns relative to their benchmarks and peer groups. These funds typically feature skilled fund managers and well-defined investment strategies.
It's important to note that past performance does not guarantee future results. These funds can vary based on market conditions and individual investor goals, with some excelling in bull markets while others providing better downside protection during downturns.
Aligning the fund's objectives with your financial goals is crucial. So, investors should consider factors beyond returns when evaluating mutual funds. This includes expense ratios, risk-adjusted performance metrics, fund size, and investment style.
How to Select the Top Performing Mutual Funds?
Selecting the top-performing mutual funds involve careful consideration of various factors to ensure consistent returns and alignment with your financial goals. Here are five key ways that can help you to identify the best mutual funds. Note that one should not solely rely on these factors and should conduct thorough research before investing.
Historical performance
Analyse the fund's returns over 3, 5, and 10-year periods. Then, compare these to benchmark indices and category averages. While past performance doesn't guarantee future results, it provides insights into the fund's consistency and management quality. You can also look for mutual fund returns that consistently outperform their benchmark.
Expense ratio
You need to look for funds with lower expense ratios, as these costs directly impact your returns. However, don't make decisions solely based on this metric. Sometimes, higher fees may be justified by superior performance or unique investment strategies.
Fund manager expertise
Research the fund manager's track record, experience, and investment philosophy. A skilled fund manager can make a significant difference in fund performance. You also have to consider how long they've been managing the specific fund and their success.
Risk-adjusted returns
Evaluate the fund's Sharpe ratio and standard deviation to understand its risk-adjusted performance. A higher Sharpe ratio indicates better returns relative to the risk taken. This helps in comparing funds with different risk profiles, depending on the cap size.
Asset allocation and diversification
You need to examine the fund's portfolio composition across stock sectors, market capitalizations, and asset classes. A well-diversified portfolio can help manage risk. You also have to ensure the fund's strategy aligns with your investment goals and risk tolerance. For equity funds, check if it invests at least 65% in equity and equity-related instruments.
Tax Implications on Mutual Funds with The Best Performance
Tax implications for top-performing mutual funds depend on the fund type and holding period. For equity funds, gains are tax-free up to ₹1 lakh per year, with a 10% tax on long-term gains (held over one year) exceeding this limit. Meanwhile, short-term gains (under 1 year) are taxed at 15%.
For debt funds, gains are added to income and taxed at the applicable slab rate for short-term holdings (under three years). Long-term gains (over three years) are taxed at 20% with indexation benefits. This tax structure can significantly impact the actual returns generated by your investment, so it's crucial to consider the tax implications when selecting mutual fund schemes.
Who Should Invest in Best Performing Mutual Funds?
Investing in top-performing mutual funds can be a smart move for various types of investors. These funds offer the potential for consistent returns and diversification. Here are five key groups that should consider this investment:
Long-term investors
Those with a time horizon of 5+ years can benefit from top performing funds. Long-term investing allows for riding out market volatility and capitalizing on compound growth. It also aligns well with long term goals such as retirement planning or wealth accumulation.
Risk-tolerant individuals
Best performing funds often take on higher risk for higher returns. Investors who are comfortable with market fluctuations and short-term losses can better handle the volatility. This is particularly true for equity mutual funds and small cap or mid cap funds, which can be more volatile but potentially more rewarding.
Wealth builders
Individuals focused on growing their wealth over time should consider top mutual funds. These funds' strong performance can help accelerate wealth accumulation. Plus, it can be quite effective when combined with regular investing and reinvesting of gains.
Diversification seekers
Investors looking to diversify their portfolios can benefit from these funds. It is thanks to their investments in different categories
(large-cap funds, mid-cap funds, small-cap funds, sector-specific). This approach can help balance risk while potentially enhancing overall portfolio performance. A mix of equity and debt funds can provide a balanced approach when investing in mutual funds.
FAQ’s
What factors determine the mutual funds that perform the best?
Top-performing mutual funds are determined by factors like historical performance, fund manager's expertise and alignment with benchmark indices.
Are mutual funds that perform the best a good investment for beginners?
Yes, top-performing mutual funds can be great for beginners due to professional management, diversification, and historical performance. They are also a potentially stable and relatively low-risk investment option.
What are the long-term benefits of investing in the mutual funds that perform the best?
Long-term benefits include consistent returns, professional management, diversification, reduced risk, and potential for capital appreciation over time.
What should I consider before investing in the mutual funds that perform the best?
As an investor, you need to consider your financial goals, risk tolerance and expense ratio. You also have to consider if the mutual funds align with your investment strategy.
Open FREE
3-in-1 Account
for all your banking, trading and demat needs
Start SIPs at just
₹100
Get started with us today and
start
building your wealth journey
*By clicking, I agree to the T&C and Whatsapp updates.
Download Torus Mobile App
Unlock the power of investing.
Invest in Stocks, Mutual Funds and Digital Gold.
Get started with our app
Get started with us today and
start
building your wealth journey
*By clicking, I agree to the T&C and Whatsapp updates.
Please wait
Redirecting
You are few steps away to open torus account
Oops !
Your Aadhar isn't linked with your mobile number. We will get in touch
with you shortly
The following SSFB savings accounts are linked to your mobile number
+91 **********. Choose one to proceed with linking it to Torus.
Thank you for choosingtorus digital’s3-in-1 Account!
Banking
Demat
Wealth
Banking
By proceeding, I acknowledge that I have read and agreed to the Terms & Conditiions.
I hereby consent to Torus Digital and its affiliate companies obtaining my personal identifiable information as provided to SSFB Ltd. during the process of opening my savings account.
Powered by
It appears you already have an existing savings account with SSFB.
Please proceed to link your active SSFB account with Torus Digital.
By proceeding, I acknowledge that I have read and agreed to the Terms & Conditiions.
I hereby consent to Torus Digital and its affiliate companies obtaining my personal identifiable information as provided to SSFB Ltd. during the process of opening my savings account.
Congratulations,
Your Digital savings bank account opening journey is complete.
We’ll now redirect you to the trading and demat account opening journey.
Redirecting...
* Disclaimer: Torus Financial Markets Pvt. Ltd. is the authorized broking partner of Torus Digital Pvt Ltd, responsible for the opening of trading and demat accounts and the execution of trades.
