Playing the mutual funds game, we all want the best results we can get. However, how to get them is the question that puzzles all investors. One of the best ways to do this is to study historically best-performing mutual funds and learn what they did right so that we can invest accordingly to replicate their success.
Before we learn about the best-performing mutual funds and their impact, it is important to understand what makes a mutual fund the best.
Characteristics of Best Performing Mutual Funds
While historical returns are the benchmark used to evaluate whether a mutual fund is successful or not, it is important to consider other factors that contributed to the success of a best-performing mutual fund:
- Skilled Management Team: Successful mutual funds are often managed by experienced and knowledgeable portfolio managers and research teams. These professionals make informed investment decisions based on their expertise and analysis of market conditions.
- Well-Defined Investment Strategy: The best-performing funds typically have a clear and well-defined investment strategy. Whether it’s growth, value, income, or a specific sector or asset class focus, a well-articulated strategy helps investors understand the fund’s objectives.
- Diversification: A diversified portfolio can help mitigate risk. Top-performing mutual funds often hold a mix of assets within their chosen investment category to spread risk and capture opportunities across different segments of the market.
- Low Expenses: Lower expense ratios mean that a larger portion of the fund’s returns is retained by investors. Low-cost mutual funds tend to outperform their high-cost counterparts over the long term.
- Consistency: The best funds maintain a consistent investment approach and avoid frequent changes to their strategy. Investors generally prefer stability and predictability in fund management.
- Transparency: Investors value transparency in terms of the fund’s holdings, expenses, and overall performance. Funds that provide clear and easily accessible information tend to gain investors’ trust.
- Tax Efficiency: Tax-efficient mutual funds aim to minimize capital gains distributions, which can have tax consequences for investors. The best-performing funds often employ strategies to minimize taxes for their investors.
- Liquidity: Liquidity is crucial for investors who want to easily buy or sell fund shares. Top-performing funds tend to have sufficient liquidity to accommodate investor transactions without significant price impact.
- Strong Support: Funds managed by reputable and well-established asset management companies may have a better chance of performing well over the long term due to their resources, expertise, and track record.
Ranked: The Best Performing Mutual Fund Types
In terms of the different types of mutual funds, it has been noticed that certain kinds of funds provide higher outputs than others, due to various reasons that warrant examination. Historically, the following have been the best-performing mutual funds in the investing space:
1. Equity Funds
Equity funds are the best-performing type of mutual fund over the long term. They invest in stocks, which have the potential to generate higher returns than other asset classes, such as bonds and cash. However, equity funds are also more volatile, meaning that they can experience larger swings in value.
2. Hybrid Funds
Hybrid funds invest in a mix of stocks and bonds. This makes them less volatile than equity funds, but they also have the potential to generate lower returns. Hybrid funds are a good option for investors who want to balance risk and reward.
3. Bond Funds
Bond funds invest in bonds, which are essentially loans made to governments and corporations. Bond funds are less volatile than equity funds and hybrid funds, but they also have the potential to generate lower returns. Bond funds are a good option for investors who are looking to preserve their capital and generate income.
4. Money Market Funds
Money market funds invest in short-term, high-quality debt securities, such as Treasury bills and commercial paper. Money market funds are the least volatile type of mutual fund, but they also have the potential to generate the lowest returns. Money market funds are a good option for investors who need a safe place to park their cash for short periods of time.
Best Performing Mutual Funds in India
In the Indian investment market, big names like Nippon and SBI have dominated the promising mutual fund landscape. However, the rising funds can perfectly capture the growth of the Indian market, turning over high profits through their insightful analysis. Following are the currently best performing mutual funds in India:
| Mutual Fund Direct Plans for Growth | CRISIL Rank | Type | 10-Year Return | 5-Year Return | 3-Year Return |
| Quant Small Cap Fund | 5 | Small Cap | 18.53% | 30.99% | 47.38% |
| Invesco India Infrastructure Fund | 5 | Thematic | 22.59% | 23.04% | 36.47% |
| Nippon India Small Cap Fund | 5 | Small Cap | 30.91% | 26.72% | 44.06% |
| Motilal Oswal Midcap Fund | 5 | Mid Cap | – | 22.83% | 37.13% |
| SBI Contra Fund | 5 | Contra | 18.92% | 23.07% | 39.29% |
| Nippon India Multicap Fund | 5 | Multi Cap | 19.04% | 19.62% | 38.63% |
| Quant Tax Plan | 5 | ELSS | 25.04% | 26.82% | 36.04% |
| Canara Robeco Infrastructure | 4 | Thematic | 19.27% | 20.81% | 37.52% |
| Franklin India Smaller Companies Fund | 4 | Small Cap | 24.17% | 20.72% | 39.49% |
| Kotak Infrastructure and Economic Reform Fund | 4 | Thematic | 21.74% | 22.11% | 40.51% |
The mentioned return rates are but estimates. So, make sure you do your research before investing in a fund.
Best Performing Mutual Funds in the World
In the international mutual fund investment landscape, there have been many funds that have provided remarkable returns throughout their life. Some of the best funds in that mix include the following:
| International Mutual Funds | Return Rates |
| ProFunds Semiconductor UltraSector Fund | 102.12% |
| T. Rowe Price Emerging Europe Fund | 83.35% |
| American Funds AMCAP | 51.93% |
| Franklin Mutual Shares | 40.48% |
| Royce Pennsylvania Mutual Invmt | 40.50% |
| Quant Small Cap Fund, Direct Plan | 39.99% |
Conclusion
If you want to be an investor who invests in the best-performing mutual funds to maximize your returns, then you must look past the mere return rates of funds and consider other aspects like strategy, management, transparency, etc.
Moreover, from the patterns, it is apparent that equity and hybrid funds focused on small and mid-cap funds from specific sectors have provided the highest returns. Therefore, if you have an appetite for risk and a passion for investing, go ahead and invest away!
