Mutual funds with high returns and low expense ratios—understand how your investment can yield better results with smart fund choices
Investors often look for mutual fund schemes that promise good returns, especially when thinking about long-term investments through Systematic Investment Plans (SIPs). While returns are important, an often-overlooked factor is the expense ratio of a mutual fund. This can significantly impact the actual returns an investor receives. Choosing funds with a lower expense ratio can make a noticeable difference in how much your money grows over time.
In this article, we’ll explore 10 mutual funds that have managed to offer excellent annualized returns ranging from 24% to 30%, all while keeping their expense ratios low. These funds have consistently performed well over one year, three years, five years, and even 10 years, making them strong contenders for those looking for economical mutual fund options.
What Is Expense Ratio and Why Should It Matter?
When you invest in a mutual fund, there are costs associated with managing the fund, including fund manager fees, administrative costs, and other operational expenses. These costs are factored into something called the expense ratio, which is expressed as a percentage of the fund’s assets.
For example, if a fund has an expense ratio of 1.5%, and the annual return is 10%, the net return you actually receive will be 8.5%. Lower expense ratios mean that a higher percentage of your returns go into your pocket.
Now, let’s explore the top 10 mutual funds that not only have high returns but also come with relatively low expense ratios.
1. Nippon India Small Cap Fund
- Expense Ratio: 0.65%
- Total Assets: ₹61,000 crore (as of August 31, 2024)
- 1 Year Return: 48.44%
- 3 Year Return: 31.76%
- 5 Year Return: 39.02%
- 10 Year Return: 24.52%
SIP Returns: Investors who have been doing SIPs in this 11-year-old fund have earned an annualized return of 29.86%. If someone had invested ₹1 lakh initially and followed it up with a monthly SIP of ₹10,000, their total investment would now be worth ₹95,29,751.
2. Quant ELSS Tax Saver Fund
- Expense Ratio: 0.65%
- Total Assets: ₹11,125 crore
- 1 Year Return: 47.42%
- 3 Year Return: 26.19%
- 5 Year Return: 38.91%
- 10 Year Return: 24.48%
SIP Returns: This fund has given investors doing SIPs an annualized return of 27.34%. If someone had invested ₹1 lakh upfront and did monthly SIPs of ₹10,000, their total investment would have grown to ₹80,81,842.
3. SBI Small Cap Fund
- Expense Ratio: 0.63%
- Total Assets: ₹33,069 crore
- 1 Year Return: 38.96%
- 3 Year Return: 24.78%
- 5 Year Return: 31.87%
- 10 Year Return: 24.02%
SIP Returns: With annualized returns of 26.88%, an investor with a lump sum of ₹1 lakh and monthly SIPs of ₹10,000 would have a portfolio now worth ₹78,46,136.
4. Motilal Oswal Midcap Fund
- Expense Ratio: 0.60%
- Total Assets: ₹15,940 crore
- 1 Year Return: 67.47%
- 3 Year Return: 37.64%
- 5 Year Return: 36.02%
- 10 Year Return: 22.83%
SIP Returns: This fund has given 25.59% annualized returns. A ₹1 lakh investment with monthly SIPs of ₹10,000 would now be valued at ₹56,32,913.
5. Edelweiss Silver Mid-Cap Fund
- Expense Ratio: 0.38%
- Total Assets: ₹7,401 crore
- 1 Year Return: 61.06%
- 3 Year Return: 28.62%
- 5 Year Return: 34.55%
- 10 Year Return: 22.01%
SIP Returns: Investors doing SIPs have earned 25.74% annualized returns. With ₹1 lakh upfront and ₹10,000 in monthly SIPs, the investment would have grown to ₹72,81,704.
6. Kotak Small Cap Fund
- Expense Ratio: 0.48%
- Total Assets: ₹17,639 crore
- 1 Year Return: 44.40%
- 3 Year Return: 22.93%
- 5 Year Return: 35.54%
- 10 Year Return: 21.95%
SIP Returns: With an annualized return of 25.59%, a lump sum investment of ₹1 lakh and monthly SIPs of ₹10,000 would have grown to ₹72,12,183.
7. Axis Small Cap Fund
- Expense Ratio: 0.54%
- Total Assets: ₹23,772 crore
- 1 Year Return: 41.34%
- 3 Year Return: 24.49%
- 5 Year Return: 32.05%
- 10 Year Return: 21.89%
SIP Returns: This fund has given 24.53% annualized returns. If someone had invested ₹1 lakh upfront and did SIPs of ₹10,000 monthly, the total value would now be ₹52,94,522.
8. Invesco India Mid Cap Fund
- Expense Ratio: 0.58%
- Total Assets: ₹5,589 crore
- 1 Year Return: 58.63%
- 3 Year Return: 27.43%
- 5 Year Return: 32.16%
- 10 Year Return: 21.10%
SIP Returns: Investors doing SIPs have earned 24.89% annualized returns. With ₹1 lakh upfront and ₹10,000 monthly SIPs, the portfolio would now be worth ₹68,89,442.
9. HSBC Small Cap Fund
- Expense Ratio: 0.68%
- Total Assets: ₹16,983 crore
- 1 Year Return: 45.09%
- 3 Year Return: 29.29%
- 5 Year Return: 33.90%
- 10 Year Return: 20.96%
SIP Returns: Investors in this fund have earned annualized returns of 23.93%. A ₹1 lakh initial investment and ₹10,000 monthly SIPs would be valued at ₹51,11,762 today.
10. HDFC Mid-Cap Opportunities Fund
- Expense Ratio: 0.72%
- Total Assets: ₹75,296 crore
- 1 Year Return: 46.13%
- 3 Year Return: 29.06%
- 5 Year Return: 31.94%
- 10 Year Return: 20.42%
SIP Returns: Investors doing SIPs in this fund have earned 24.15% annualized returns. A ₹1 lakh investment and ₹10,000 monthly SIPs would now be worth ₹65,62,786.
Key Takeaways: Consider Expense Ratio for Higher Actual Returns
While selecting a mutual fund for your investment, always consider the expense ratio along with returns. Even a small difference in the expense ratio can have a significant impact on your net returns, especially over the long term. All the funds mentioned above have a relatively low expense ratio, making them cost-effective options for SIP investors looking to maximize their returns.
Choosing the right fund with a lower expense ratio can make a significant difference in your financial future, especially if you’re investing for the long haul through SIPs.
(Source: Value Research, Amfi)
(Disclaimer: Mutual funds are subject to market risk read all scheme related documents carefully)
