Top 5 mutual funds: MFs have become a popular investment option among the middle class and one of the major reasons for this is the flexibility part. Out of various investment options, mutual funds give an investor opportunity to remain a moderate, aggressive or a conservative investor. In short, mutual funds have options available for all kinds of investors. However, it becomes important for any investor to know what are the best options available in the markets, when it comes to choosing small-cap, mid-cap and large-cap funds.

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Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants, speaking on the small-cap, mid-cap and large-cap mutual funds from the perspective of profit, said, "Small-cap mutual funds have the tendency to give highest returns because the underlying companies are young, and seek to expand aggressively. They are more vulnerable to a business or economic downturn, making them more volatile than large and mid-caps. Investors who are keen to invest in the small-cap space and may not have the time to research but possess the high risk-taking capacity can look to invest in small-cap funds." He said that small- and mid-cap funds typically outperform large-caps during a bull market, but decline more when the sentiment turns bearish. The choice of a right fund should be in line with the risk appetite, return expectations and investment horizon of the investor.

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Suggesting investors to remain focussed on their investment goals Balwant Jain, a Mumbai-based tax and investment expert said, "You have to consider various factors and not alone the risk appetite. What is the use of risk appetite when your ability to take risk has almost come down to nil.  So one should invest in small-cap funds when one has risk appetite coupled with risk-taking ability as well as a time horizon of at least 10 years to accumulate the corpus for the required goal."

Asked about his top choices in the small-cap mutual funds that have a better potential for returns, Balwant Jain said, "My favorite small-cap fund is SBI small-cap, which was earlier known and SBI small and midcap fund. It has given a return of  2.38 per cent for one year, 13.62 per cent for three years period and 20.77 per cent for five years against 7.99 per cent, 7.08% per cent and  12.86 per cent  respectively as a category."

Source: Balwant Jain

On his top 5 choices in various categories of the mutual funds, Jain said that Mirae Asset Large Cap Fund in large-cap, Kotak Emerging Equity Fund in mid-cap, Axis Long term equity fund in ELSS, HDFC Small-cap fund in small-cap and ICICI Pru Equity and Debt fund in Aggressive Hybrid Equity Fund are his top options for mutual fund investors with varying risk appetites. 

Kartik Jhaveri also agreed that the 5 above-mentioned mutual fund plans have better potential for generating great returns for investors.