Top 15 Mutual Fund Wealth Creators 2023

A fantastic approach to accumulate wealth is through mutual funds. Depending on your risk tolerance, you may choose the best mix of funds from a range of options. Furthermore, you do not need to be wealthy to become wealthy. To begin your wealth creation journey, you can invest in mutual funds gradually using SIP. In this article, Henil Shah presents the top 15 mutual funds that have made investors wealthy in last five years.

A majority of wealthy people, both locally and internationally, are clearly owners of well-run companies. However, not everyone has the ability to become a great businessman to become wealthy or generate wealth. But by becoming a shareholder in a corporation, one might become a partner in a growing and successful business. For uninformed investors, picking the appropriate companies to invest in is like walking through a minefield because a poor decision might deplete your wealth rather than grow it. As a result, hiring specialists is the best option. 

For such individuals, mutual funds are an excellent approach to generate wealth. Depending on your risk tolerance, you may choose the best mix of funds from a range of options. The use of this strategy by investors in India is helping them flourish. This is evident with the growth in the assets under management (AUM) of the Indian mutual fund industry.
 

“Equity mutual funds are the perfect solution for people who want to own stocks without doing their own research,” ace American investor Peter Lynch once commented.
 

Indian MF Industry Growth in Last Five Years

The AUM of the domestic mutual fund industry as on January 31, 2023 stood at ₹39.62 lakh crore. In the last five years it has increased from ₹22.86 lakh crore as on January 31, 2018, showing a compounded annual growth rate (CAGR) of 11.78 per cent.

Such a rise in AUM has come along with the adoption of mutual funds by more and more investors. The mutual fund industry crossed a milestone of 10 crore folios during the month of May 2021. The total number of accounts (or folios as per mutual fund parlance) as on January 31, 2023 stood at 14.28 crore, while the number of folios under equity, hybrid and solution-oriented schemes, wherein the maximum investment is from the retail segment, stood at about 11.43 crore. In fact,he growth in the systematic investment plans (SIPs) has been spectacular in the last five years. Indian mutual funds currently have about 6.22 crore SIP accounts through which investors regularly invest in various MF schemes. This was around 5.28 crore as on March 2022, increasing by 17.8 per cent.

MF Performance in Last Five Years

In the last five years, on an average the annualised returns of equity funds, Debt Funds and Hybrid Funds were 10.28 per cent, 5.65 per cent and 7.33 per cent, respectively.

In equity, technology, pharmaceutical and Small-Caps were the best performers in the last five years. On the flipside, automobile, MNC and international funds suffered the most.

As can be seen from the above graph, gilt funds with 10-year constant duration, banking and PSU debt funds and gilt funds fared well while credit risk funds, overnight funds and medium duration funds posted lower returns. 

Multi-asset allocation funds have outperformed other categories in hybrid funds. This was followed by aggressive hybrid and solution-oriented funds. Arbitrage, however, proved to be the worst performer of the pack in the last five years.

Creating Wealth with MFs

Even though people invest for varied financial goals, the ultimate goal is to create wealth. So, what are the factors that you need to keep in mind for creating wealth with mutual funds? Let’s find out.

Portfolio Diversification — You need a diverse mutual fund portfolio in order to realise better risk-adjusted returns. All mutual fund categories and sub-categories perform differently depending on the volatility of the equity market. You may reduce your risk by investing in a range of assets. Your portfolio will also grow if you invest in Large-Cap, small-cap and Mid-Cap funds. Over time, this might boost your return on investment. 

Investing via SIP — SIPs are an excellent method of investing in mutual funds. Even in down markets, SIP investments often yield higher returns due to their minimal risk. Additionally, it could shield your money from the consequences of any prospective market meltdowns. Timing in SIPs is less important than it is in traditional investing for generating higher return. Furthermore, because interest is compounded, SIPs yield greater profits. The ability to make tiny monthly payments and the fact that it won’t interfere with your financial planning makes investing an easy process.

Understanding Your Risk Profile — When investing in mutual funds, it is typically a good idea to consider your age when determining your risk-taking capacity. When you are young, you should put the majority of your money in equity funds. However, as you age, you should progressively shift from equity funds to debt funds. A knowledgeable financial adviser can assist you in this regard.

Performance Review — Reviewing your fund’s performance on a regular basis has several advantages. This enables you to plan your asset allocation and investment diversification accordingly. As a result, you will be able to constantly monitor your risk tolerance and how it affects your financial objectives. Also, keeping a constant eye on your fund’s performance ensures that your investment is active and responsive to market dynamics. This understanding can help you achieve better returns over time.
 

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