Here are the top five mutual fund categories for long-term investing:

When it comes to investing for long-term wealth creation, mutual funds stand out as one of the better options. Mutual funds’ assets under management (AUM) have reached an unprecedented 48 trillion yen, underscoring widespread confidence in this investment vehicle. With over 20 categories of mutual funds and numerous subcategories, choosing the best option can be difficult. In this article, we’ll look at the top five categories of mutual funds aimed at long-term growth.

Large-cap and mid-cap mutual funds: Mutual funds in this category offer sustainable growth with moderate risk. The firm invests in large, well-established companies, ranking from 1st to 100th among the top listed companies. In addition, it also includes mid-sized companies ranked from 101st to 250th among listed companies, with the potential for expansion. As per Sebi regulations, you need to invest a minimum of 35% each in large-cap and mid-cap stocks in this category. With an investment horizon of five years or more and a moderate risk-taking capacity, these funds are suitable for investors with long-term goals such as buying a home or educating their children. Over the past five years, benchmarks in this category have generated returns of around 18%, while top-performing funds have generated returns of 19% to 20%.

Mid-cap investment trust: Investing in this category is relatively risky as it focuses on stocks of mid-sized companies ranging from 101st to 250th among publicly traded companies. He has an investment horizon of more than 7 years and has a high risk tolerance. The growth of these companies can be significantly affected during economic downturns, and investors are advised to remain patient and invest for the long term. Over the past five years, benchmarks in this category have generated returns of around 22%, with the best-performing funds achieving returns of 22% to 24%.

Flexicap investment trust: Flexicap funds are required to invest in all market capitalizations, including large-cap, mid-cap and small-cap stocks, making it a dynamic equity scheme. The fund can invest in any listed company, regardless of market capitalization, using a predefined investment structure in a key information document. This flexibility allows fund managers to modify their portfolios in response to market trends, reducing risk and lowering volatility. It is suitable for investors with an investment period of 7 years or more and who are somewhat risk averse. Over the past five years, benchmarks in this category have produced returns of around 16%, while top-performing funds have offered returns ranging from 20% to 25%.

Balanced Advantage Fund: These mutual funds belong to the dynamic asset allocation category and invest in both stocks and bonds. The allocation between these two asset classes changes based on market conditions and aims to provide optimal returns with minimal risk. This category offers a combination of equity for growth and debt for stability, allowing fund managers to adjust investment levels in both asset classes in response to different market cycles. Suitable for an investor with a moderate risk tolerance and his investment horizon of five years or more, the benchmark in this category has generated returns of around 16% over the past five years, with the best performing funds around 17 Achieved a return of %.

Equity Linked Savings Scheme (ELSS): These funds, like Flexi-AP funds, invest in stocks of all market capitalizations, but have the added benefit of qualifying the investments under Section 80C for tax savings. Investors in ELSS enjoy the dual benefits of tax savings and growth. ELSS has the shortest lock-in period of 3 years, making it a better tax-saving investment compared to other options with a lock-in period of more than 5 years. Over the past five years, benchmarks in this category have generated returns of around 16%, while top-performing funds have delivered returns ranging from 17% to 23%.

Conclusion: From the blend of large-cap, mid-cap and mid-cap funds to the flexibility of flexi-cap funds, the strategic adaptability of balanced advantage funds and the tax efficiency of ELSS funds, we explore the dynamic landscape of these five categories. is showing. Diverse opportunities for investors. These options allow you to build a mutual fund portfolio with market-beating returns and effective risk-adjusted ratios. Each category has its own risk and return profile, providing a wide range of choices to suit different investment objectives. It remains extremely important to seek advice from a qualified financial advisor to make informed investment decisions that are consistent with your risk-taking capacity, investment horizon, and financial goals.

Nehal Mota is co-founder and CEO of Finnovate.