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Best Equity Mutual Funds

Over the past years, mutual funds have been gaining in popularity because of their ability to offer good returns, high liquidity and even tax advantages. However, many investors still find it hard to find the best equity mutual funds to invest in. This is because the number of asset management companies have also mushroomed in recent years, each offering different products. There are also a multitude of schemes like large cap, mid cap, sectoral mutual funds etc. So the investor has his work cut out trying to find the best equity mutual funds to invest in.

How does an investor find the best equity mutual funds to invest in; one that is suited to his or her requirements? Of course, the easy way out would be to find the top equity mutual funds in terms of returns.

But finding the top equity mutual funds is only part of the story. Before that you must find the best equity mutual funds for you. That is, one that is suited to your investment goals and risk appetite. For instance, if you have a low risk appetite and seek steady returns, a mid cap or small cap mutual fund, which offer high returns but also higher risk, may not be the right choice for you. Instead the best choice could large cap equity funds. These offer lower returns than equity funds but involve considerably less risk.

The best equity mutual funds to invest in are those that obviously offer high returns. But you should also be mindful of the time frame while considering returns. For example, you might think that the best ones to invest in would be those that make the most returns over a one-year period. But that may not be the case. Investing in equity funds needs a longer time frame, and the top equity mutual funds may be those who do well over a longer period – say three to five years.

In order to maximise returns, you can’t just buy top equity mutual funds and assume that this is enough. Portfolios have to be rejigged from time to time, since all mutual funds may not perform consistently over time. If you need to have the best funds in your portfolio, you must make changes and get rid of the laggards. But shuffling around portfolios too often is also not advisable.

We at Angel BEE will help you find the top equity mutual funds using our considerable expertise. You can find one for you depending on your investment goals and risk appetite.

Large Cap Equity funds

A large cap equity fund is one that invests in large, well established companies that are well traded in the stock exchange and have a large market capitalisation. Generally, large cap funds are preferred by conservative investors who want steady and stable returns, with lower risk. The Securities and Exchange Board of India (SEBI) classifies large cap companies as the top 100 companies in terms of market cap. In monetary terms, this is between Rs 6 lakh crore and Rs 30,000 crore (as of June 2018).

The top large cap equity funds invest in the stocks of reputed companies that make up the BSE Sensex, like Tata Consultancy Services (TCS), Reliance Industries Ltd (RIL), ITC, HDFC Bank and Unilever. Though there isn’t a great deal of variation between the different large cap funds, a good fund manager can make a difference. The top large cap equity funds have excellent fund managers who can maximise returns and minimise losses.

Mid Cap Equity Funds

Mid cap equity funds are those that invest in stocks of companies that are still the growing stage. These are ideal for investors who are willing to bear a higher level of risk in exchange for more returns. In order to maximise returns, any portfolio should have a mix of mid cap funds and large cap funds. Mid cap companies are those in the Rs 500-10,000 crore range in terms of market capitalisation.

One thing to note about these is that they tend to be more volatile, rising faster in a bull market, but falling harder when the bears have their grip on the market. If the market is in a bull run, these funds may be what you need, since top mid cap equity funds can make great returns. But there’s the risk of the downside as well during a bear phase – but as they say, `no pain, no gain’. Mid cap funds also don’t have the kind of liquidity that you find in large cap funds because they’re not bought and sold as much. You can find the top mid cap equity fund using our tool.

Small Cap Equity Fund

Small cap equity funds invest in the stocks of companies that are still in their infancy. These are the riskiest of all equity funds, since most of the companies in the small cap group are relatively unknown. These comprise all companies listed on the stock exchange, other than the top 250 by market capitalisation.

But while the risk in is great, so is the prospect of making high returns. A top small cap equity fund can make handsome returns. Remember that most companies started out as small cap stocks. Today’s small cap company could be a large cap firm in a few years’ time. In these funds, the fund manager plays a crucial role since the fund’s success or failure will depend on his ability to pick winners from the losers. So when you are looking for top small cap equity fund, do make sure that you look at the fund manager’s record closely.

Large and Mid Cap Equity Fund

A large and mid cap equity fund will invest in mix of large cap and mid cap stocks. Through this combination, this type of fund will attempt to balance the high return and high risk that investing in mid cap companies entails, with the lower return but lower risk profile of a large cap company.

A large and mid cap equity fund is suitable for investors don’t want to miss out on the opportunity of investing in mid cap stocks that offer the possibility of high growth and high returns. At the same time, investors in these equity funds want the stability that a large cap stock offers. According the Securities & Exchange Board of India (SEBI) regulations, large and mid cap funds have to invest a minimum of 35 per cent in large cap stocks and 35 per cent in mid cap shares.

ELSS Equity Fund (Tax Saving)

The Income Tax Act allows investors to claim a deduction in taxable income by investing in something called equity linked savings scheme (ELSS). So if you invest in an ELSS equity fund, your taxable income will get reduced to that extent. For example, an investment of Rs 1.5 lakh (the maximum allowable) in this fund will help you reduce your taxable income from, say, Rs 10 lakh to Rs 8.5 lakh, leading to a considerable saving in income tax.

What’s more, if you invest in a top ELSS equity fund, you also get the benefit of returns from investing in the equity market for three years – which is the minimum period for which you will have to stay invested to get income tax benefits.

Generally, most fund managers of ELSS funds tend to invest in large cap stocks. Some may invest in mid cap funds too. The top ELSS equity funds tend to have a mix of both to maximise returns.

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Factors to consider before investing in equity funds

All mutual funds are not alike, but there are some of the characteristics that top equity funds share. Here’s what you need to know about investing in the best equity funds:

  • Returns: As they say, the proof of the pudding is in the eating. The best equity funds, quite naturally, will give you the highest returns. While making comparisons, you will naturally have to make it for several periods – for example, one, three or five years. The best equity funds will have consistent returns over longer periods.

  • Expense ratio: An expense ratio is what a mutual fund charges to manage your investment. This is a percentage of assets under management (AUM). You have to look closely at the expense ratio since this will cut into your returns. Higher the expense ratio, lower your returns. But of course some of the top equity funds may have a higher expense ratio since you have to pay a price for expertise and good management.

  • Fund managers: It goes without saying that the best equity funds will have the best fund managers. So it’s important to look at the fund manager’s expertise and reputation before you make your investment. But in some categories of mutual funds, fund managers will not have much of a role to play, like in index funds, where investments are restricted to stocks that form an index, like the Sensex or Nifty. A small cap equity fund, on the other hand, may need considerable expertise on the part of the fund manager. So the top equity funds in this category will have good fund managers.

  • Risk appetite: Everyone’s risk appetite is different, and the perception of best equity funds will differ according to the risk an investor is prepared to take. A conservative investor will prefer steady returns and low risk, while an a more adventurous one may be prepared to take on more risk in the hope of making higher than expected returns. If you are a conservative investor, you can go in for large cap, index or even debt funds. If are able to bear more risk, mid cap and small cap funds could be the right choice for you. Mixing them up could be a good way of diversifying your portfolio and minimizing risk.

  • Systematic Investment Plan (SIP): It’s always a good idea to invest in an SIP rather than make lump sum investments. Select one of the top equity funds and start an SIP. There are two advantages of doing this. For one, you will be able to invest small sums that you can spare each month. Two, by investing at regular intervals you will be able to average out the ups and downs of the stock market and enjoy steady returns.


The right time to start investing in an equity fund is now. You simply cannot afford not to have equity funds in your portfolio. There are many kinds of equity funds and you can choose the best equity fund to invest in depending on your risk appetite and investment goals. Certainly, there’s market risk involved in equity investments, but you should not lose sight of the fact that, over time, equity has outshone most other asset classes in terms of returns.

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