Mutual fund returns are uncertain and their past performances may not be repeated
04-Sep-2015 •Research Desk
I am considering investing an amount of ₹1 lakh per month for the next 12 years. What will be this investment worth at the end of 12 years? I would like to know whether there funds that can give a CAGR of 15 percent or more and have they been around for a long time? Is it fair to expect a return of 15 % or more ( given past history of the funds ) on a CAGR basis?
- Sanjay Arora
Mutual fund returns are uncertain and their past performances may not be repeated. However, when it comes to choosing funds for investment, we search for the best performers in the category. While there is no guarantee, we can rely on funds with compelling history and invest in them. Revisiting the investment portfolio once a year or so is also necessary to replace bad performers with good ones. This will reduce your chances of losing your money.
You have a long investment tenure of 12 years. You can build an Aggressive Growth Portfolio which invests 50 per cent into equity mid & small cap schemes and the rest in large & mid cap funds. You can avoid investing in debt for now. We have found funds with a minimum age 7-yr, fetching 5- yr and subsequent year's CAGR of 15% or more. It gives us a long list of 35 funds. Here are the top 15 funds out of the list.
| Fund Name | Category | 5-Yr Return (%) | 7-Yr Return (%) | 10-Yr Return (%) |
| Birla Sun Life Mid Cap | EQ-M&SC | 12.52 | 16.97 | 17.85 |
| Canara Robeco Emerging Equities | EQ-M&SC | 19.98 | 21.54 | 17.22 |
| Franklin India Flexi Cap | EQ-LC&MC | 13.1 | 16.22 | 17.24 |
| Franklin India Prima | EQ-M&SC | 17.36 | 19.44 | 15.36 |
| Franklin India Prima Plus | EQ-LC&MC | 14.18 | 15.86 | 18.28 |
| ICICI Prudential Midcap | EQ-M&SC | 13.99 | 14.76 | 14.62 |
| ICICI Prudential Value Discovery | EQ-M&SC | 17.64 | 22.94 | 19.54 |
| L&T Midcap | EQ-M&SC | 15.57 | 18.16 | 16.53 |
| Reliance Equity Opportunities | EQ-M&SC | 14.51 | 19.68 | 19.23 |
| SBI Magnum Global | EQ-M&SC | 17.57 | 18.77 | 18.38 |
| SBI Magnum Midcap | EQ-M&SC | 18.58 | 16.24 | 15.74 |
| Sundaram S.M.I.L.E. | EQ-M&SC | 13.65 | 17.37 | 17.68 |
| Sundaram Select Midcap | EQ-M&SC | 16.32 | 20.06 | 20.96 |
| Tata Midcap Growth | EQ-M&SC | 16.94 | 17.14 | 15.44 |
| UTI Mid Cap | EQ-M&SC | 18.41 | 20.37 | 16.46 |
| *as on September 3, 2015 | ||||
Looking at historical returns,above funds seem safe however, there is no guarantee. You may invest in 3 to 4 funds of your choice and once you near your goal term, switch to debt to freeze returns and be safe. Future Value of your monthly investment of 1 lakh rupees at end of each year is given in table below.
| Year | Total Instalments paid | at 12% Returns (%) | at 15% Returns (%) |
| 1 | 1200000 | 1268250 | 1286036 |
| 2 | 2400000 | 2697346 | 2778808 |
| 3 | 3600000 | 4307688 | 4511551 |
| 4 | 4800000 | 6122261 | 6522839 |
| 5 | 6000000 | 8166967 | 8857451 |
| 6 | 7200000 | 10470993 | 11567362 |
| 7 | 8400000 | 13067227 | 14712904 |
| 8 | 9600000 | 15992729 | 18364106 |
| 9 | 10800000 | 19289258 | 22602255 |
| 10 | 12000000 | 23003869 | 27521706 |
