4 Mutual Fund Schemes With The Best 5-Year Returns, Should You Start SIPs?

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oi-Sunil Fernandes

| Published: Sunday, September 12, 2021, 1:00 [IST]

Technology stocks have soared in the last 1-year and with it some of the funds that are dedicated digital funds have seen their net asset values see a dramatic rise. In fact, in terms of 5-years annualized returns all of these funds are from the digital or tech dedicated funds. Let’s take a look.

Best 5-year returns, open ended schemes, annualized

Name of the fund 5-year returns, annualized
Tata Digital India Fund 33.38%
ICICI Prudential Technology Fund 33.25%
Aditya Birla Sunlife Digital India 30.99%
SBI Technology Opportunities fund 28.44%

According to the data that we pulled out, top of the charts is the Tata Digital India Fund based on Morningstar data for annualized 5-year returns, followed by ICICI Prudential Technology Fund, Aditya Birla Sunlife Digital India and SBI Technology Opportunities Fund. Interestingly, these are all tech funds, which have performed well, thanks to the stupendous rally in IT stocks.

Should you start SIPs in these funds based on past performance?

We are not in favour of starting SIPs in funds with large sums every month. This is simply because the markets have run-up sharply and they are at a significant premium to long term averages. The Sensex is at 21% premium to long-term averages, thus making it expensive.

According to A Motilal Oswal report the Nifty 12-month forward P/E of 21.8x is at a premium of 21% v/s its long term averages of 18.0 times. This means the markets are at least 21% over and above its long term averages.

Having said that smaller amount of SIPs would be the ideal way and a gradual increment if the markets fall is a better way to go about investing. For example, let us assume that you have savings of Rs 20,000 each month, which you would like to park in SIPs. We suggest that just put small amounts of Rs 5,000 or Rs 10,000 and if the markets drop, you can increase.

Always difficult to predict the ideal mutual fund scheme

Every investor wants the highest possible returns and it’s difficult to pick the ideal one. At times you may have to rely on ratings of the mutual funds by noted rating agencies. However, in practice there are unlikely to be a mutual fund that keeps offering the best returns year on year. There were times when HDFC Mutual Fund schemes were the most sort after. These days you have schemes from names like Mirae Asset Management and Axis Mutual Fund that are ranking well in the equity mutual fund space. Things change fast in the equity markets and a fund manager does not always get it right. A laggard of today, might just be a sterling performer tomorrow.


The returns from the mutual funds mentioned in this story are taken from Morningstar. Please do consult a professional advisor before you invest in mutual funds. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article. Caution needs to be exercised as mutual funds are subject to risks associated with the stock markets.

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Story first published: Sunday, September 12, 2021, 1:00 [IST]

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