Why Investing in PSU Mutual Funds via SIPs is Gaining Popularity
Public Sector Undertaking (PSU) mutual funds have become a favorite for many investors looking to invest in government companies. In recent years, these funds have delivered impressive returns, making them an attractive option for those who prefer stability alongside growth. Systematic Investment Plans (SIPs) in PSU funds have generated up to 49% returns over five years, proving their potential for wealth creation. Let’s dive into what makes PSU mutual funds a good investment option and take a closer look at the top three funds that have delivered solid results.
What Are PSU Mutual Funds?
PSU mutual funds primarily invest in stocks of government-owned companies, also known as Public Sector Undertakings (PSUs). According to the rules, these funds must allocate at least 80% of their investments to public sector companies. The advantage here is that investors get to benefit from the stability and growth of government-backed enterprises, often leading to strong long-term returns. Here are three PSU mutual funds that have stood out for their performance in the past five years.
Top 3 PSU Mutual Funds Offering Excellent Returns
1. CPSE ETF: Low Expense, High Returns
- Annualized Returns on Lump Sum (5 years): 33.52%
- Annualized Returns on SIP (5 years): 49.41%
- SIP Value of Rs 5,000/month After 5 Years: Rs 9,72,742
- Asset Under Management (AUM): Rs 43,013.11 crore
- Expense Ratio: 0.07%
- Risk Level: Very High
CPSE ETF is an Exchange Traded Fund (ETF) that tracks the performance of key government-owned companies. It offers investors exposure to large, well-established firms in sectors like energy, banking, and infrastructure. With a very low expense ratio of just 0.07%, CPSE ETF has proven to be a cost-effective way to tap into the growth of PSUs while enjoying solid returns. The SIP route in this fund has particularly shone, with nearly 50% annualized returns in five years.
2. SBI PSU Fund (Direct Plan): Strong Long-Term Growth
- Annualized Returns on Lump Sum (5 years): 29.00%
- Annualized Returns on SIP (5 years): 39.06%
- SIP Value of Rs 5,000/month After 5 Years: Rs 7,71,668
- AUM: Rs 4,509.31 crore
- Expense Ratio: 0.72%
- Risk Level: Very High
SBI PSU Fund has consistently outperformed over the years, driven by its investments in government-owned companies. As per regulations, this fund keeps more than 80% of its assets in PSUs, which provides the fund with a stable growth trajectory. The fund’s robust 5-year SIP returns of over 39% make it a great option for long-term investors looking to benefit from the consistent performance of large PSUs.
3. Invesco India PSU Equity Fund (Direct Plan): High Performance with Risk
- Annualized Returns on Lump Sum (5 years): 32.42%
- Annualized Returns on SIP (5 years): 38.98%
- SIP Value of Rs 5,000/month After 5 Years: Rs 7,72,762
- AUM: Rs 1,397.80 crore
- Expense Ratio: 0.76%
- Risk Level: Very High
Invesco India PSU Equity Fund focuses on capturing the growth potential of Indian government companies. With a similar mandate of holding over 80% in PSUs, this fund has been able to capitalize on the performance of sectors like energy and utilities. While the risk level is high, its returns over the last five years make it an appealing choice for those willing to stay invested for a longer duration.
Thematic Advantage: Why PSU Funds Stand Out
PSU mutual funds are categorized as thematic funds, meaning they focus on a specific theme—in this case, government-owned companies. This differentiates them from sectoral funds that concentrate on a single industry. Thematic funds, like PSU funds, provide better diversification by investing across various sectors that fall under the theme. As a result, the risk is spread out more evenly compared to sector-specific funds, though they still fall under the high-risk category due to the volatility in stock markets.
Investors looking to include PSU mutual funds in their portfolios should ensure their exposure is limited to around 10% and aim for long-term investment to ride out market fluctuations. For those willing to take on higher risk for potentially higher rewards, PSU mutual funds have demonstrated their capacity to deliver strong returns, especially when approached through a SIP strategy.
Investing in PSU mutual funds via SIPs has proven to be a profitable long-term strategy, with some funds delivering close to 50% annualized returns over five years. Whether through CPSE ETF, SBI PSU Fund, or Invesco India PSU Equity Fund, these funds have showcased their ability to generate wealth by tapping into the growth and stability of government companies. While high-risk, the diversification offered by these thematic funds makes them a noteworthy addition to any long-term investment plan.
