- Over long periods, some equity funds have delivered over 20% CAGR
- Experts suggest equity mutual funds for inflation-beating returns
- But investors should have a long term horizon, they say
Rs 5,000 per month for 20 years. Total corpus accumulated: Over Rs 1 crore. And also tax free. Although, it seems unbelievable, it is a fact that some equity funds have generated over 20 per cent CAGR return over a period of last 20 years and have helped investors accumulate a wealth of over Rs 1 crore by investing just Rs 5,000 per month for 20 years or on a total investment of just Rs 12 lakh. In the present scenario where bank interest rates are on a falling trend, financial planners say that equity mutual funds are one of the best instruments to accumulate long-term savings through systematic investment plan (SIP). Gains from equity mutual funds after a year are tax-free.
However, fund selection is one of the most difficult things to do for a retail investor as it needs lot of research. Financial planners say diversified equity funds are the best to invest through SIP for long term. Here are some funds which have generates over 20 per cent CAGR return in past 20 years:
1) HDFC Equity Fund: Launched on January 1, 1995, it is one of the oldest and best performing funds in India. If you had started an SIP of Rs 5,000 in this fund on April 1, 1998, your investment would have grown to Rs 1.95 crore by April 1, 2017, which means a CAGR return of 23.56 per cent over 20 years.
2) Reliance Growth Fund: This fund has generated a CAGR return of 23.68 per cent since its inception. Your Rs 5,000 SIP in this fund, started on April 1, 1998 would have helped you accumulate a corpus of Rs 2.12 crore by April 1, 2017 implying 17.66 times return in 20 years.
3) Franklin India Prima Fund: It is one of the flagship fund of Franklin Templeton India. Since its inception in December 1993, it has generated a CAGR return of 21.04 per cent till now. If you had started an SIP of Rs 5,000 in this fund on April 1, 1998, your investment would have grown to Rs 2.38 crore by April 1, 2017, which means a CAGR return of 25.11 per cent over 20 years.
5) HDFC Top 200 Fund: This flagship fund of HDFC Mutual Fund has generated a CAGR return of 20.88 per cent since its inception in September 1996. If you would have started an SIP of Rs 5,000 in this fund on April 1, 1998, your investment would have grown to Rs 1.43 crore by April 1, 2017.
With falling return on bank fixed deposits, equity mutual funds are witnessing increased investment from retail investors now. Equity and equity-linked schemes have seen inflows of more than Rs 70,000 crore in last financial year according to Association of Mutual Funds in India data.(Data source: Valueresearchonline.com)
Disclaimer: Investors are advised to make their own assessment before acting on the information.
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