Investing in mutual funds via a systematic investment plan (SIP) can be a smart way to build wealth gradually, especially when selecting funds with strong ratings and proven performance. These funds often show high returns, low risk, and competitive expense ratios, making them attractive options for long-term investors. Here, we look at five high-performing mutual funds that have delivered 4 to 6 times returns in the last five years, making them some of the best-rated choices in the market.
1. Quant Small Cap Fund
With one of the highest returns in its category, the Quant Small Cap Fund has shown consistent growth over the past five years. This fund has maintained a strong annual return rate of 43.58% on SIP investments, translating to an impressive total value of Rs.17,17,051 from a Rs.10,000 monthly SIP. For those who invested a lump sum five years ago, this fund provided a remarkable annual return rate of 45.76%, turning Rs.1 lakh into Rs.6,61,339.
- Total Assets: Rs.26,645 crore (as of September 2024)
- Expense Ratio: 1.59%
2. Bank of India Small Cap Fund
Another solid performer, the Bank of India Small Cap Fund, offers an annual return of 34.6% on SIP investments. Over five years, a monthly SIP of Rs.10,000 would have grown to Rs.13,96,890. For those who invested a lump sum amount, the returns are equally noteworthy, with an annual growth rate of 35.94%, increasing an initial Rs.1 lakh investment to Rs.4,66,208.
- Total Assets: Rs.1,517 crore (as of September 2024)
- Expense Ratio: 2.01%
3. Nippon India Small Cap Fund
Nippon India Small Cap Fund has shown strong performance with an annual SIP return rate of 38.05%. Investors who started a monthly SIP of Rs.10,000 five years ago now see their investment valued at Rs.15,13,239. A one-time investment of Rs.1 lakh five years back has also yielded an impressive Rs.4,59,046.
- Total Assets: Rs.62,260 crore (as of September 2024)
- Expense Ratio: 1.42%
4. Canara Robeco Small Cap Fund
The Canara Robeco Small Cap Fund provides a good balance of returns and stability, with an annual SIP return of 32.42%. A monthly SIP investment of Rs.10,000 over five years has grown to Rs.13,27,427, while a lump sum investment of Rs.1 lakh five years ago would be worth Rs.4,25,647 today, with a 33.5% annual return rate.
- Total Assets: Rs.12,591 crore (as of September 2024)
- Expense Ratio: 1.67%
5. Tata Small Cap Fund
With an annual SIP return of 35.65%, the Tata Small Cap Fund is a solid performer in the small-cap space. A monthly SIP of Rs.10,000 for five years would now stand at Rs.14,31,219. Lump sum investors have also seen steady growth, with Rs.1 lakh turning into Rs.4,16,158 at an annual return rate of 32.95%.
- Total Assets: Rs.9,312 crore (as of September 2024)
- Expense Ratio: 1.68%
What Makes These Funds Top-Rated?
Mutual funds with 4 or 5-star ratings tend to carry a reputation for reliable performance, solid portfolio management, and moderate risk. These high ratings often reflect a history of delivering strong returns while maintaining a competitive expense ratio. For example, the expense ratios of these funds range from 1.42% to 2.01%, which can impact overall returns. A lower expense ratio generally means more money is invested in the market rather than in administrative costs.
These funds are primarily focused on small-cap stocks, which come with a higher risk but have shown substantial returns, especially in long-term investments. Investors should consider factors like expense ratio, portfolio composition, and fund manager experience before committing.
Key Considerations Before Investing
While these high-rated funds have shown great returns, they are market-dependent, and past performance does not guarantee future results. Small-cap funds, in particular, are sensitive to market fluctuations, making them more suitable for investors with a higher risk tolerance and a long investment horizon.
As with all investments, it’s advisable to consult a financial advisor to assess individual risk tolerance and goals before choosing a mutual fund.
