Mutual Funds : Your Pathway To Wealth

As more investors embrace the potential of mutual funds, they are not only unlocking opportunities for wealth creation but also contributing to the broader financial inclusion and prosperity of the nation. DSIJ highlights why investors should look at mutual funds more seriously. 

Traditionally, Indians have favoured physical assets like gold and real estate as a means of securing their financial future. Bank fixed deposits, known for their stability, were also a preferred choice among financial instruments. However, the past few years have witnessed a significant paradigm shift in the investment behaviour of individual investors. A remarkable trend has emerged wherein there is a decline in investments in physical assets and a simultaneous surge in investments in financial assets, particularly equity and mutual funds.[EasyDNNnews:PaidContentStart] 

This shift reflects the growing ‘financial trend’ of household savings in India, with a notable preference for financial instruments offering potentially higher returns and diversification benefits. Among these financial instruments, equity and mutual funds have emerged as the frontrunners, capturing the attention and trust of retail investors seeking avenues for wealth creation. This trend is evident in the industry’s assets under management (AUM), which have risen to constitute 79 per cent of bank fixed deposits, a significant leap from 59 per cent recorded five years ago. 

It signals a departure from traditional banking products towards equity and mutual funds. Mutual funds, in particular, have emerged as the preferred investment vehicle among retail investors, evident from the exponential growth in the number of folios and accounts over the past few years. Since December 2014, the number of investor accounts has witnessed a steady upward trajectory, soaring from 4.03 crore to 16.49 crore by December 2023. The acceleration in growth, especially since 2020, highlights the increasing adoption of mutual funds as a wealth-building tool. 

This surge represents an impressive annualised growth rate of 20.5 per cent, outpacing the previous decade’s compounded annual growth rate of 14.4 per cent, underlining the growing confidence in mutual funds among Indian investors. The impact of this transformation is reflected in broader metrics such as mutual fund AUM as a percentage of GDP in India, which has risen from 11.9 per cent in FY17 to approximately 19 per cent presently. Within the mutual fund landscape, equity funds have spearheaded this growth, experiencing a remarkable surge in AUM over the past five years. 

The AUM of domestic equity mutual funds surged from ₹7.9 lakh crore in 2018 to ₹23.8 lakh crore in 2023, marking an annual increase of nearly 25 per cent, surpassing the overall AUM growth rate of 16 per cent during the same period. This surge in equity AUM can be attributed to two primary factors: consistent inflows and mark-tomarket gains. Indian equitydedicated mutual funds have remained resilient, never witnessing net outflows since the start of 2014. Even during the tumultuous period induced by the corona virus pandemic in 2020, equity mutual funds managed to end the year with a net inflow of ₹6,400 crore. 

This reaffirms investor confidence in equities as a wealthbuilding asset class. Contrastingly, the last instance of net outflows from equity mutual funds occurred in 2013, highlighting the enduring appeal of equities over time. The combination of steady inflows and favourable market performance has resulted in significant wealth creation for mutual fund investors. Despite facing challenges and wealth erosion in 2018 and 2019, equity-dedicated mutual funds have consistently generated wealth for investors. Over the past five years, investors in equity mutual funds have accrued wealth amounting to ₹9.574 lakh crore, with ₹5.14 lakh crore of this wealth created in 2023 alone, illustrating the robust wealthbuilding potential of equity investments. 

Creating Wealth through Mutual Funds
Here are some of the ways through which mutual funds help to create wealth: 

1) Power of Compounding : One of the best ways to understand this concept is to understand how renowned and legendary investor Warren Buffet built his fortune. There is a plethora of books and websites dedicated on this topic, and most of them cover all the aspects relating to how he values, selects and invests in stocks. Nonetheless, what they really miss is the period for which he has been investing and remained a good investor. He started investing when he was 10 years old and now, at the age of 93, it is estimated that his net worth is USD 122 billion. 

The cornerstone of wealth creation through mutual funds lies in the magic of compounding. Imagine planting a seed. With time and consistent watering, it blossoms into a mighty tree. Similarly, your initial investment in a mutual fund, even as small as ₹1,000, when coupled with regular contributions and the power of compounding, can grow exponentially over time. Using the power of compounding, you can sit back and watch your mutual fund’s value grow in resonance with the growth of the equity and other markets. 

"In investing, you get what you don't pay for. Costs matter. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won't be foolish enough to think that they can consistently outsmart the market."

John C Bogle
American investor and business magnate 

2) Diversification : The mantra is to spread your bets and minimise the risk. Unlike putting all your eggs in one basket, mutual funds allow you to invest in a diverse portfolio of stocks, bonds or other assets. This diversification helps mitigate risk, as a downturn in one sector may be offset by the stable performance of another. Imagine facing a storm: a single tree might succumb, but a diverse forest weathers the wind. This policy of not putting all your eggs in a single basket significantly reduces risk and protects your hard-earned money. Mutual funds have an edge over many other asset classes or assets. 

You don’t need a sack full of money to start investing. Even a single note of ₹500 is good enough. It’s critical to begin immediately and continue investing regularly, whatever be the amount. Invest small amounts every month instead of waiting to accumulate a big lump sum amount. In fact, several studies have shown that investing regularly every month is a better method for retail investors to make money from the stock markets. There is a plethora of mutual funds to choose from and depending on your risk profile, you can choose those which suit both your attitude to investing and the money at your disposal. 

3) Making Investment Simple : Mutual funds greatly simplify the task of investing small amounts regularly through what is called a systematic investment plan (SIP). It is a method to invest a defined amount with a defined frequency in a mutual fund. For example, you can create an SIP to invest ₹500 every month in a mutual fund for the next 12 months. This way, you can put your investment plan on auto-pilot. 

4) Access to Professional Expertise : Let’s face it, not everyone has the time or expertise to actively manage their investments. Mutual funds bridge this gap by bringing seasoned professionals on board. Fund managers, armed with in-depth market knowledge and research, meticulously select and manage the underlying assets within the fund, striving to deliver optimal returns aligned with your chosen investment objective. You get the benefit of their expertise without the hassle of individual stock-picking or market analysis. 

5) Tailored to your Needs : The Indian mutual fund industry offers numerous options catering to diverse investor needs and risk appetites. From aggressive equity funds aiming for high growth to conservative Debt Funds prioritising income generation, there’s a fund for everyone. Whether you are a young investor building your nest egg or nearing retirement seeking regular income, you can find a fund that aligns seamlessly with your financial goals and risk tolerance. 

6) Convenience and Affordability : Investing in mutual funds is incredibly convenient. With online platforms and mobile apps, you can invest instantly, track your portfolio performance, and make transactions seamlessly. Moreover, many funds offer SIPs, allowing you to invest small, regular amounts, making wealth creation a gradual and manageable process. This affordability breaks down barriers to entry, democratising wealth creation for even those with limited savings. 

Data Speaks Volumes
In our earlier paragraphs we have already explained how mutual funds have helped investors earn superior returns. To realise this, consider the impressive performance of the Indian mutual fund industry. Over the past 10 years (as of January 31, 2024), the average equity mutual fund has delivered a return of 17.25 per cent annually, significantly outperforming traditional fixed deposit rates or average inflation in the same period. This underscores the potential of mutual funds to generate wealth when chosen and managed strategically. However, while mutual funds are a powerful tool, they aren’t without their share of risks. 

Market fluctuations can lead to short-term volatility, and patience and a long-term investment horizon are crucial. Thorough research, understanding your risk appetite, and choosing the right fund based on your goals are essential for the success of your financial journey. The evolving investment landscape in India underscores the growing prominence of mutual funds as a vehicle for wealth creation. With their diversified portfolios, professional management and accessibility, mutual funds offer investors a compelling pathway to long-term financial growth. On the broader side, mutual funds also contribute to the economic growth of the country. 

Quant Focused Fund
Category Equity: Focused I Benchmark : NIFTY 500 TRI
Fund Manager: Ankit A Pande & Vasav Sahgal 

NAV as of Feb 12, 2024 : ....... 87.92
AUM (₹ crore) : ....... 655.64
Expense ratio (Jan 31, 2024) : ....... 0.76%
Returns since inception (Per Annum) : ....... 19.11% 

Canara Robeco Blue Chip Equity Fund
Category Equity: Large Cap I Benchmark : S&P BSE 100 TRI
Fund Manager : Shridatta Bhandwaldar & Vishal Mishra

NAV as of Feb 12, 2024 : ....... 58.56
AUM (₹ crore) : ....... 11,823.30
Expense ratio (Dec 31, 2023) : ....... 0.50%
Returns since inception (Per Annum) : ....... 15.23%






Baroda Bnp Paribas Large Cap Fund
Category Equity : Large Cap I Benchmark : NIFTY 100 TRI
Fund Manager : Jitendra Sriram 

NAV as of Feb 12, 2024 : ........ 211.96
AUM (₹ crore) : ........ 1,743.14
Expense ratio (Jan 31, 2024) : ........ 0.92%
Returns since inception (Per Annum) : ........ 16.19% 

Nippon India Large Cap Fund
Category Equity : Large Cap I Benchmark : S&P BSE 100 TRI
Fund Manager : Ashutosh Bhargava 

NAV as of Feb 12, 2024 : .... 81.63
AUM (₹ crore) : .... 21,453.98
Expense ratio (Jan 31, 2024) : .... 0.82%
Returns since inception (Per Annum) : .... 16.67% 

ICICI Prudential Bluechip Fund Nippon India Large Cap
Fund Category Equity : Large Cap I Benchmark : NIFTY 100 TRI
Fund Manager : Anish Tawakley & Vaibhav Dusad 

NAV as of Feb 12, 2024 : ...... 99.96
AUM (₹ crore) : ...... 49,837.78
Expense ratio (Dec 31, 2023) : ...... 0.93%
Returns since inception (Per Annum) : ...... 16.29% 


 

Mirae Asset Midcap Fund
Category Equity: Mid Cap I Benchmark : NIFTY Midcap 150 TRI
Fund Manager : Ankit Jain 

NAV as of Feb 12, 2024 : ....... 31.62
AUM (₹ crore) : ....... 14,361.60
Expense ratio (Dec 31, 2023) : ....... 0.56%
Returns since inception (Per Annum) : ....... 28.80% 
 

Quant Mid Cap Fund
Category Equity: Mid Cap I Benchmark : NIFTY Midcap 150
TRI Fund Manager : Ankit A Pande & Vasav Sahgal 

NAV as of Feb 12, 2024 : ........ 223.67
AUM (₹ crore) : ........ 4,857.91
Expense ratio (Dec 31, 2023) : ........ 0.76%
Returns since inception (Per Annum) : ........ 19.61% 

Motilal Oswal Midcap Fund
Category Equity : Mid Cap I Benchmark : NIFTY Midcap 150 TRI
Fund Manager : Niket Shah & Rakesh Shetty 

NAV as of Feb 12, 2024 : .... 84.27
AUM (₹ crore) : .... 7,972.05
Expense ratio (Dec, 2023) : .... 0.56%
Returns since inception (Per Annum) : .... 23.81% 

PGIM India Midcap Opportunities Fund
Category Equity : Mid Cap I Benchmark : NIFTY Midcap 150 TRI
Fund Manager : Puneet Pal, Vinay Paharia, Anandha Padmanabhan Anjeneyan & Utsav Mehta 

NAV as of Feb 12, 2024 : ...... 60.11
AUM (₹ crore) : ...... 9,962.07 Expense ratio (Dec 31, 2023) : ...... 0.42%
Returns since inception (Per Annum) : ...... 19.22% 

Edelweiss Mid Cap Fund BANK OF INDIA Small Cap Fund
Category Equity : Mid Cap I Benchmark : NIFTY Midcap 150 TRI Fund Manager : Trideep Bhattacharya & Sahil Shah 

NAV as of Feb 12, 2024 : ....... 86.37
AUM (₹ crore) : ....... 4,915.47
Expense ratio (Jan 31, 2024) : ....... 1.00%
Returns since inception (Per Annum) : ....... 22.60% 

BANK OF INDIA Small Cap Fund
Category Equity : Small Cap I Benchmark : NIFTY Smallcap 250 TRI
Fund Manager : Dhruv Bhatia 

NAV as of Feb 13, 2024 : ....... 41.49
AUM (₹ crore) : ....... 910.93
Expense ratio (Dec 31, 2023) : ....... 0.88%
Returns since inception (Per Annum) : ....... 31.89% 



 

Nippon India Small Cap Fund
Category Equity : Small Cap I Benchmark : NIFTY Smallcap 250
TRI Fund Manager : Samir Rachh & Tejas Sheth 

NAV as of Feb 13, 2024 : ....... 155.09
AUM (₹ crore) : ....... 45,894.01
Expense ratio (Jan 31, 2024) : ....... 0.73%
Returns since inception (Per Annum) : ....... 26.84% 



 

ICICI Prudential Smallcap Fund 
Category Equity: Small Cap I Benchmark : NIFTY Smallcap 250 TRI
Fund Manager : Anish Tawakley & Sri Sharma 

NAV as of Feb 13, 2024 : ....... 82.90
AUM (₹ crore) : ....... 7,455.41
Expense ratio (Jan 31, 2024) : ....... 0.66%
Returns since inception (Per Annum) : ....... 18.64% 



 

Axis Small Cap Fund Tata Small Cap Fund
Category Equity: Small Cap I Benchmark : NIFTY Smallcap 250 TRI
Fund Manager : Shreyash Devalkar & Mayank Hyanki 

NAV as of Feb 13, 2024 : ....... 99.3
AUM (₹ crore) : ....... 19,530.69
Expense ratio (Jan 31, 2024) : ....... 0.51%
Returns since inception (Per Annum) : ....... 25.23% 

Tata Small Cap Fund 
Category Equity : Small Cap I Benchmark : NIFTY Smallcap 250 TRI
Fund Manager : Chandraprakash Padiyar & Chandraprakash Padiyar 

NAV as of Feb 13, 2024 : ....... 35.52
AUM (₹ crore) : ....... 6,125.33
Expense ratio (Jan 31, 2024) : ....... 0.32%
Returns since inception (Per Annum) : ....... 27.23% 


 

*All funds mentioned are Direct Plan with Growth Option. 

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