Top 10 Mutual Funds That Could Help You Double Your Wealth in 5 Years
The mutual fund industry is seeing terrific growth, particularly in the equity mutual funds category. Apart from the international equity schemes, most of the equity mutual funds have followed a relentless march of delivering high returns. The average CAGR over the last five years has been more than 15%. Therefore, the wealth of many investors has been seriously multiplied.
Since 2020, retail inflows into mutual funds have been increasing consistently, and this also occurred during the month of August 2024. Total net inflow into equity schemes increased to Rs.38,239 crore till August, surging by 3.3% compared with Rs.37,113 crore collected as part of July’s inflow. Meanwhile, the SIP witnessed a record net inflow of Rs.2,350 crore during August. That is the 14th consecutive month that the SIP would be reporting an all-time high.
To double wealth in five years, an investment will need to grow at the compounded annual growth rate of 14.87% or more. Several categories of mutual funds have shown such potential over the past few years.
Here is a list of 10 categories of mutual funds that may have a good chance of doubling investments in the next five years:
1. Multi Cap Mutual Funds: The lot has been able to deliver more than 25% CAGR over the last five years, thus making this category a great candidate for growth in wealth.
2. Flexi Cap Funds: With the flexibility to invest across market capitalizations, these funds allow managers to navigate market bubbles and even take cash calls when necessary. The category has shown a CAGR of around 21% in the past five years.
3. Multi Asset Allocation Funds: Hybrid funds with a minimum investment of 10% in three different asset classes offer lower risk compared with equities or hybrid funds. The five-year average CAGR is at 19.2%.
4. Contra Funds: Contra funds have yielded an average annualized return of 27% over the last five years due to their approach to investing against prevailing market trends.
5. MNC Funds: MNC (Multinational Corporation) funds have given investments in companies that have good corporate governance and have offered annual returns of 19% over the same period.
6. Nifty Index Funds: For slightly more conservative investors, Nifty Index Funds would be a relatively safer play in the large-cap space. The average annual return for these index funds over the past five years has been 18%.
7. Banks and Financial Services Sectoral Funds: The sector is likely to do much better in three to five years. Private banks have remained disappointingly weak lately but with earnings growth at least.
8. Technology Mutual Funds: These funds have seen recent underperformance and align with global interest rate cuts, so will be good likely candidates for future growth.
9. Large Cap Funds: Those that are presently fairly valued, with five-year averages having been over 19%. They are fairly appropriate for the moderately aggressive investor seeking longer-run growth.
10. ELSS Funds: Perhaps this is the most unlikely category, but the point of difference is that it is mandated to have a three-year lock-in period. Hence, the investors as well as the fund managers will stay invested for an extended period. ELSS funds have given a five-year average return of 22%, with the best funds returning more than 28%.
Conclusion
Coming out of thematic funds at the right time is very crucial and a financial advisor may guide this. Just like everything above, even though such funds have done well over time, only market conditions and personal investment goals should motivate them to invest in those funds.
