A growth mutual fund invests in the stocks of various companies which have the potential to grow faster than that of the stock market offering capital appreciation. With different schemes available today the most confusing part is choosing a suitable one. In this regard, this blog will guide you to gain proper knowledge on the best growth mutual fund so that you can gain desired returns over time.
What Is Growth Mutual Fund?
A growth mutual fund primarily invests in stocks or equities of emerging companies that have the potential to expand. Companies with potential to offer investors higher returns are included in a growth mutual fund’s portfolio. These are the funds with high volatility, a high return, and a high expense ratio with no dividend payout. However, growth funds may result in losses during bearish market conditions. Investors with a medium-term investment horizon will find it to be a wise choice.
If you are willing to bear a moderate risk in exchange for high returns and do not want to participate in stock research growth mutual funds are the best option for you.
So, before making any investment in such a market it is essential to know the best growth mutual funds that would give you the desired returns over time.
Top Performing or Best Growth Mutual Funds in India
Here is the list of growth mutual fund schemes to invest in now:
| Fund | NAV | Net Assets (Cr) | 3 Yr Return (%) | 5 Yr Return (%) |
| SBI Small Cap Fund
| ₹125.72 | ₹15,335 | 32.24 | 18.58 |
| Principal Emerging Bluechip Fund | ₹ 183.316
| ₹3,124 | 21.9 | 19.2 |
| Franklin Build India Fund | ₹71.33
| ₹1,250 | 19.91 | 11.47 |
| DSP BlackRock Natural Resources and New Energy Fund | ₹57.67
| ₹698 | 18.03 | 6.73 |
| ICICI Prudential Banking and Financial Services Fund | ₹90.43
| ₹5,694 | 10.85 | 6.91 |
| Sundaram Rural and Consumption Fund | ₹62.08
| ₹1,228 | 15.86 | 8.49 |
| Aditya Birla Sun Life Banking And Financial Services Fund | ₹40.78
| ₹2,561 | 10.87 | 6.4 |
| Kotak Equity Opportunities Fund | ₹206.55
| ₹11,662 | 19.63 | 11.84 |
| Tata Equity PE Fund | ₹208.71
| ₹5,494 | 15.17 | 8.01 |
| Tata India Tax Savings Fund | ₹29.24
| ₹3,280 | 16.51 | 10.48 |
Note: Data is as of 6th January 2023
Advantages of Investing in Growth Mutual Funds
The growth of mutual funds in India has established a competitive advantage for the investnment industry, allowing investors to diversify their investments across assets. Furthermore, you can enjoy a wide range of benefits, such as:
- There is no assurance that large-cap funds will generate the highest returns. But you can earn higher profitability if the market conditions remain bullish or favourable.
- One of the notable benefits of a growth fund is that it comes with a reinvestment feature. This implies that the fund house reinvests the scheme's profit for further expansion.
- An expert fund manager handpicks the stocks of companies with impressive growth prospects. These professionals put a lot of effort in identifying the best stocks in the market. As a result, despite the risk, the expert selling and buying decisions of a fund manager can create a significant return.
- In the growth fund's portfolio, you can find a balanced selection of high-growth stocks. Because of its diversification you not only enjoy the rising returns of multiple stocks, but it also lessens the impact of market fluctuation.
Risks Involved with Growth Funds
Growth funds are a high-risk investment, ideal for aggressive risk-takers. Before investing in them, ensure to learn about some of the major risks involved:
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Investment Horizons
If you want to benefit from a growth fund investment it is crucial to stay invested for a period of 5 to 10 years. On the other hand, if you looking for instant profit for short period, a growth fund may not be a viable option.
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Market Volatility
Due to the fluctuations in stock prices, growth funds can be highly volatile. Investing in shares of various companies means during market downturns, your net profitability can suffer a massive setback.
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Zero Dividend Payout
Growth funds do not necessarily offer periodic dividends. So, if you are one of those investors seeking a regular income source via dividends and bonuses you may not benefit from this type of fund.
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Additional Costs
In order to manage a fund, AMCs charge different fees such as expense ratio which can adversely affect the returns you earn from a mutual fund scheme.
Things to Consider While Selecting Top Performing Mutual Funds
Now that you know the advantages and disadvantages of investing in mutual funds, here are some of the factors that can help you to identify the top-performing mutual funds.
- You must only invest in mutual funds after considering your financial objectives. Then to determine whether investing in a mutual fund will assist you in achieving your financial objectives, you need to evaluate your requirements in relation to the scheme's objectives.
- The expense ratio creates a great impact on your net profitability. It is represented as a percentage of the fund's assets. The higher the expense ratio, the lower your return. Therefore you should look for a scheme with a lower expense ratio while choosing a fund.
- The fund's history and consistency also play an important role in this process. It provides a record of the fund's performance over time, including times of downturns and rising markets. You must also evaluate the fund's performance across several business cycles to evaluate its performance during downturns.
- An experienced fund manager put a lot of effort to manage your fund portfolio. Therefore, it is crucial to keep a tab on the fund manager's track record to monitor its performance during times of bullish and bear markets.
Final Word
You can earn substantial returns by investing in growth mutual funds. However, before investing in these funds, you should always consider various factors like past returns of the scheme, experience of the fund manager, investment objective and risk appetite.