There has been a stellar turnaround witnessed in mutual fund industry. Data compiled by IIFL Securities reveals that domestic mutual funds, which have been net sellers for last couple of months, turned buyers as they bought Rs 6,156 crore worth of equities during May 2019. Meanwhile, the industry continued to witness robust SIP inflows. If not equities, then one of the best and highest returns providing investment would be mutual funds. But not many are aware about how they should make an investment in mutual funds. Considering it is also a market-linked investment, there is always a fear of risk in the back of investors' minds. However, one needs to note that, with great risk comes great return. 

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Why SIPs?

Experts at IIFL Securities in their research note explained that, equity is the best way to create wealth in long term vs. other asset classes like debt, gold, real estate, etc., since historically it has been seen that equity based investments have given inflation beating returns over long term despite short term volatility. Equity mutual fund is a right way for investors to invest in equity market especially those who do not have time and/or knowledge to understand the equity market. 

The Indian mutual fund industry is well regulated, transparent and mature. Instead of timing the market, investors can regularly invest in the market and can reap the benefit of ‘Rupee Cost Averaging’ via SIP.

Where to invest?

IIFL in its note, has recommended 5 mutual funds to create wealth in the long term. 

1. Canara Robeco Equity Hybrid Fund: 

It is an equity-oriented balanced fund, which does tactical Asset Allocation allocation between debt and equity based on the market outlook to ensure optimal risk reward. The fund increases its exposure in debt when the equity market is overvalued and increases its allocation to equity when it is undervalued.

Up till April 2019, the fund had invested ~69% of AUM in equity. The fund had invested ~51% of the AUM in large cap stocks, while ~18% was invested in midcap and small cap stocks.

The note says, “Investors who want to follow balanced approach i.e. 65% equity and ~35% debt, can invest in the scheme to create wealth in the long term. The scheme can also invest up to ~10% in REITs/InvITs.”

2. Axis Bluechip Fund:

This one is an equity fund which primarily invests in top 100 stocks by market capitalization. The fund invests in companies which have significant market share and are leaders in their respective industries. It’s strategy is to invest in quality companies with credible management, sustainable profit growth & cash flow and having a clean balance sheet.

The fund had invested ~88% of AUM in large cap stocks as on April 2019. The fund has highest allocation to HDFC Bank (~10%), followed by TCS(~9%).

“Investors who want to primarily invest in diversified portfolio of large cap stocks can invest in this fund to create wealth in the long term,” says expert in the note. 

3. L&T India Value Fund:

It is a value-conscious equity fund that aims to invest Asset Allocation predominantly in equity and equity related securities in the Indian markets with higher focus on undervalued securities. The Scheme could also additionally invest in Foreign Securities in international markets.

This fund has invested ~66% of AUM in large cap stocks, ~22% was allocated to midcap and ~11% in small cap stocks as on April 2019. Also, it has the highest allocation to Reliance Industries(6.9%) followed by ICICI Bank(6.6%) Infosys(5.4%).

The note guides, investors who are value conscious and want to invest in large cap and midcap stocks can invest in the fund to create wealth in the long term.

4. ICICI Pru Midcap Fund:

This fund predominantly invests in diversified midcap stocks, which Asset Allocation tend to exhibit higher growth than large cap stocks. While aiming to identify and invest in growth companies which have potential to grow. It also emphasizes on management integrity.

So far upto April 2019, the fund had invested ~66% of AUM in midcap stocks, ~5% was in large cap stocks and ~23% was allocated to small cap stocks. The fund has highest allocation to Indian Hotels(5.8%) followed by Exide Industries (4.5%) and PI Industries(3.9%).

According to the note, investors who want to primarily invest in midcap stocks can invest in this fund to create wealth in long term.

5. Sundaram Small Cap Fund:

Being a small cap focused fund, it invests in Asset Allocation attractively valued high growth stocks. Currently, the fund is overweight on sectors aligned towards impending domestic economic recovery. Also, the fund uses a bottom-up approach for stock picking.

94% of its AUM was invested in small cap stocks and ~6% was allocated to debt instruments as on March 2019. Highest allocation are made to Tube Investments(4.5%) followed by Navin Fluorine(~4%) and NRB Bearings(~4%).

As per the note’s view, investors who are looking to invest money for at least 3 years and expect very high returns can invest in this fund.

Therefore, invest wisely in mutual fund schemes and let June, 2019 be a fruitful month for you.