Best Mutual Funds for Long Term

Investing in mutual funds is a great way to grow your money over time—mutual funds pool money from many investors to buy various stocks, bonds, or other securities. When you invest in mutual funds, you essentially buy a small part of a larger, diversified portfolio managed by professionals. Mutual funds can offer good returns with the right investment choices for long-term goals like retirement, children's education, or buying a house. Here’s a post to help you understand the best mutual funds for long-term investment.

What are the Best Mutual Funds?

The most suitable mutual funds for investors consistently give steady returns over many years. They have expert fund managers who make wise investment choices based on economic conditions. The funds invest money across different industries, balancing risks and improving profit chances. 

Equity or share market funds, balanced funds mixing shares and fixed income options, and passively managed index funds tend to deliver good long-run growth, so they are well-liked. By following prudent practices of portfolio balancing, seasoned fund management and staying invested for long horizons, top mutual funds achieve compounding benefits that create wealth.

Top 10 Best Mutual Funds

The top 10 best SIP plan for long term are as follows:

Overview of Best Mutual Funds

Here is a brief overview of the best mutual funds next 10 years: 

Bandhan Infrastructure Fund
Bandhan Infrastructure Fund primarily invests in infrastructure-related sectors such as power, construction, and telecommunications. It has delivered a 72.66% return over the past year, reflecting the sector’s growth due to increased government spending. The fund's sectoral focus means higher risk, making it suitable for investors with a high-risk tolerance.

Canara Robeco Infrastructure Fund
Canara Robeco Infrastructure Fund targets companies in construction, capital goods, and related sectors. It returned 67.75% last year, driven by economic recovery and government initiatives. As a sectoral fund, it carries higher volatility and is ideal for investors seeking exposure to infrastructure growth.

DSP T.I.G.E.R. Fund
DSP T.I.G.E.R. Fund invests in companies benefiting from economic reforms and infrastructure development, delivering 63.74% returns in the past year. Its diversified portfolio across industrials, utilities, and financials makes it attractive for investors willing to handle sectoral risks for potential high returns.

ICICI Prudential BHARAT 22 FOF Fund
This Fund invests in the Bharat 22 ETF, which comprises public sector undertakings and large private firms. It earned 55.6% last year, reflecting its diverse exposure to sectors like energy and finance. It is suitable for investors seeking a mix of stability and growth with moderate risk.

Motilal Oswal Midcap Fund
Focusing on mid-cap companies, Motilal Oswal Midcap Fund posted a 70.7% return last year. It targets firms with solid growth potential, making it ideal for investors seeking higher returns with a moderate to high-risk tolerance due to mid-cap volatility.

Kotak Infrastructure and Economic Reform Fund
This fund, which has returned 56.7% over the past year, invests in companies likely to benefit from India’s economic reforms. It focuses on sectors like power and capital goods, making it suitable for optimistic investors who are aware of India’s reform-led growth but are also aware of sectoral risks.

Quant Small Cap Fund
Quant Small Cap Fund invests in small-cap companies, providing a 56.0% return last year. It targets high growth but involves greater volatility, making it best for investors comfortable with higher risk for potential long-term gains.

Nippon India Small Cap Fund
Nippon India Small Cap Fund focuses on high-growth small-cap stocks, returning 49.0% last year. It’s suited for investors seeking aggressive growth opportunities to understand the high volatility of small caps.

Tata Small Cap Fund
With a 53.1% return, Tata Small Cap Fund invests in small companies with high growth potential. It is suitable for investors looking for long-term gains with a high tolerance for risk and market fluctuations.

HDFC Focused 30 Fund
HDFC Focused 30 Fund invests in a concentrated portfolio of up to 30 stocks, achieving a 43.5% return last year. This high-conviction approach can yield high returns but carries higher risk due to limited diversification, which is ideal for investors seeking focused growth opportunities.

Advantages of Best Mutual Fund

Some of the key benefits of the best mutual funds are as follows:

Diversification: Reduces the risk as investments are spread across multiple securities.

Professional Management: Experienced fund managers make investment decisions on behalf of varied investors.

Liquidity: Mutual funds are easy to buy and sell, providing quick access to your money.

Systematic Investment Plan (SIP): This allows you to invest small amounts regularly, making it easier to build wealth over time.

Disadvantages of Best Mutual Funds

Here are the key disadvantages of mutual funds:

Vulnerable to Share Market Volatility: Funds investing majorly in stocks face high market-related risks. Stock price changes directly impact mutual fund investment values - leading to fluctuations.

Uncertain Returns: Even well-performing long-term mutual funds cannot guarantee fixed higher returns year-on-year. Some years may remain low despite excellent performance later, impacting average gains.

Redemptions Based on Ongoing NAV: Withdrawing money early from these funds gives you the current prevailing value. If the fund recently faced losses, your investment value also reduces proportionally compared to the peak.

Taxation on Best Mutual Funds

The taxation on mutual funds is as follows: 

Higher Tax on Equity Fund Short-Term Gains: If equity mutual fund units are sold within 1 year, profits are taxed at 20% - up from 15% earlier.

Long-Term Gains Tax Modifications: Holding equity funds for over 1 year classifies gains as long-term. Tax exemptions increased from ₹1 lakh to ₹1.25 lakh. However, the tax rate increased from 10% to 12.5% on amounts above this.

Removal of Indexation Benefit: The budget removes indexation benefits that reduce taxable components by factoring in inflation. To be applicable across mutual funds.

Who Should Invest in the Best Mutual Funds?

Investors with Extended Investment Horizon: Long-term mutual funds suit those willing to remain invested for 5-10 years or more for goals like retirement planning, child future planning, etc.

Seeking High Growth Opportunity: These funds focus around 65% on shares, aiming to deliver higher returns than fixed deposits over the years as stock markets rise. They are ideal for wealth creation needs.

Accepting Some Risks: As returns are not fixed, investors should be comfortable with some volatility from significant equity exposure. Upside potential tradeoff requires risk tolerance.