Best Mutual Funds 2018-19 | Top Equity Funds post SEBI’s Reclassification

Mutual Funds are the best tools for long term wealth creation. We have thousands of mutual fund schemes to choose from. But, the challenge is to identify the right and top performing mutual funds that can help you in achieving your Financial Goals.

Thanks to SEBI’s new norms regarding Mutual Fund classification, this number will come down to a great extent.

Every year, I publish an article on ‘Best Mutual Fund Schemes’.  This year I had to wait for the new re-categorization rules to kick-in. Now that almost all the Fund houses have started implementing these new rules, I believe that this is the right time to publish an indicative list of best equity mutual fund schemes that can be considered for your Long term goals.

I had earlier published an article on ‘Best Equity mutual Fund schemes 2017. Below is the top 15 mutual funds (category wise) list as per my old article.

• Large-cap fund category
  • Birla Sunlife Frontline Equity Fund
  • SBI Bluechip Fund
  • ICICI Pru Focused Blue-chip Equity Fund
• Diversified or Multi-cap category
  • Franklin India Prima plus
  • ICICI Prudential Value Discovery Fund
  • L&T Value Fund
• Mid-cap fund category
  • HDFC Midcap
  • Franklin India Prima Fund
  • UTI Mid-cap Fund
• Small-cap Category
  • Franklin India Smaller Companies Fund
  • DSP Micro Cap Fund
  • SBI Small & Mid-cap
• Hybrid – Equity oriented category
  • HDFC Balanced
  • SBI Balanced Fund
• ELSS / Tax saving category
  • Franklin India Tax shield
  • Axis Long Term Equity Fund
  • Birla Sunlife Tax plan

Types of Equity Mutual Fund Schemes – New Categorization & Definition

Equity oriented Mutual Fund Schemes are now classified as below;

• I believe that it is prudent to invest in a Mutli-cap fund than in a fund which falls under ‘Large-Mid-cap’ category. Hence, I am not short listing any funds under ‘Large-Midcap’ category.
• Some of the popular Equity funds which are typically considered as Mutli-cap funds may now fall under ‘Value Fund’ or ‘Focused Fund’ categories. For ex : ICICI Prudential Value Discovery Fund has been classified as a Value Fund instead of Mutli-cap Fund.
• I have not considered Thematic or sectoral Funds while preparing the list of best equity mutual schemes after SEBI’s reclassification rules.
• Hybrid Funds have been classified into different categories. However, I am considering only Aggressive Hyrbid Funds (Equity Oriented Balanced Funds) here.
• In order to ensure uniformity in respect of the investment universe for equity schemes, SEBI’s new classification rules clearly define large cap, mid cap and small cap Stocks as follows:
  • Large Cap : 1st – 100th company in terms of full market capitalization.
  • Mid Cap : 101st – 250th company in terms of full market capitalization.
  • Small Cap : 251st company onwards in terms of full market capitalization. 

Best Mutual Funds 2018-19 | Top Equity Funds for SIP

Below is my indicative list of best performing equity mutual funds to invest now ;

(Except for few, most of the schemes are under-going cosmetic or drastic changes w.r.t type of scheme, investment objective, investment strategy and portfolio allocation. Hence, I believe that past performance may become irrelevant. We may have to consider them as whole new funds with new benchmark and new set of Peers for making a comparison.

It takes time to get the relevant Data (returns and risk data) to make a comparison among the Funds within the same category and also the funds with respective benchmarks and so on….So, as of now, I am just providing an indicative list of Best Equity Funds that you may consider for investment.)

Best Large Cap Mutual Fund Schemes 2018

• Birla Sunlife Frontline Equity Fund
• ICICI Prudential Bluechip Equity Fund
• SBI Bluechip Fund
• You may consider other Funds like Franklin Bluechip Fund or an Index Fund like HDFC Sensex Index Fund.

Best Multi-cap Funds 2018-19

• Franklin India Equity Fund
• Aditya Birla Sun Life Equity Fund
• Kotak Standard Multicap Fund
• You may also keep a track of some of the popular multi-cap funds like Franklin High Growth Companies Fund (will now be classified as a ‘Focused Fund’), Funds like Quantum Long Term Equity Fund & ICICI Value Discovery Fund are now classified as ‘Value Funds’ instead of Mutli-cap ones.

Top Mid-Cap Mutual Fund Schemes

• Franklin India Prima Fund
• HDFC Mid-cap Opportunities Fund
• Franklin India Smaller Companies Fund
• Under Small-cap Fund category, you may also consider funds like SBI Small cap or L&T Emerging Businesses Fund.

Best ELSS Tax Saving Mutual Fund Schemes

• Aditya Birla Sun Life Tax Relief ’96 Fund
• Axis Long Term Equity Fund
• Franklin India Taxshield Fund

Top Aggressive Hybrid Equity Funds (Equity oriented Balanced Funds)

• HDFC Hybrid Equity Fund
• Aditya Birla Sun Life Equity Hybrid ’95 Fund
• L&T Hybrid Equity Fund

My Mutual Fund Portfolio

Above is my mutual fund portfolio for the last few years. I am planning to redeem existing units of TATA Balanced fund & UTI Mid-cap Fund and re-invest in HDFC Balanced Fund & HDFC Mid-cap Opportunities Fund respectively.

My Spouse invests in Birla Tax Relief ’96 Fund for long term + Tax saving purposes.

My observations & general suggestions

• Identify your Goals : Majority of us identify the products first and then try to shortlist best investment avenues. An investor has to first identify his/her financial goals and then try to short-list best available investment options. This is applicable for mutual fund investments also.
• Invest Goal-wise & not as per your age-wise: Even if you are a Senior citizen, you can invest in Equity funds if they are suitable to your investment objectives. Equity funds are for any type of investors.
• Diversify across Fund categories & Fund houses : I often observe that investors invest in multiple funds of same Fund house. Suggest you to not only invest in funds offered by different fund houses but also try to pick funds from different fund categories.
• Are you an existing MF Investor? : It is a high time you review your mutual fund portfolio. After the latest changes, many schemes have ended up being quite different from what they were originally. Therefore, you need to keep a close eye on your MF portfolio, watch out for any changes that may occur and act accordingly. Go through the communication you receive or have received from your fund houses. If you have invested in a large-cap fund and if it is now been moved to Large-Mid-cap category then you are going to take higher risk with your investments. Under such circumstances, you may have to switch out from such fund and move to pure Large-cap Fund. In case, there are no major changes being proposed for the funds that you have invested in, kindly keep a track of their performance for next 12 months or so.
• New Investor ? : If you are new to Mutual Funds, you may consider the above list of funds.
• Have Realistic Expectations – In the past, schemes often changed their investment style based on market conditions. For example, a large-cap fund would take sizable midcap exposure as the fund manager believed that he could add extra return by doing so, and outperform his peer group. In future, when you buy a large-cap fund, you will get what you think you are buying. Schemes will have to stick to their mandate. So, have realistic expectations from your equity fund investments and do not go by past performance. For time-being, you can ditch mutual fund star ratings.
• Invest in Index Funds : If you are not comfortable investing in actively managed Funds, you can now start picking Index based Funds. 
• Long Term Capital Gains are now Taxable : You may be aware that long term capital gains on Equity Funds are now taxable. So, watch out for tax implications when you do redemption, Switch or STP.
• Mutual Funds Vs ULIPs : As LTCG on Equity funds are now taxable, most of the investors might start thinking about ULIPs as an alternate to Mutual Funds. Suggest you to kindly go through this detailed article on this topic – ‘Mutual Funds Vs ULIPs – Which is better?‘
• Direct Vs Regular Plans : I do get lot of queries on what is the difference between ‘Regular plan’ and ‘Direct plan’. Kindly read this article for a detailed explanation on this topic : What are Direct Plans of Mutual Fund Schemes?.

Do you invest in Mutual Funds for your Long term Financial Goals? Have you reviewed your MF Portfolio post SEBI reclassification? – Kindly share your comments, Cheers!

Continue reading :

• Why your Best Mutual Fund Schemes may not remain as ‘the best’? | Categorization & Rationalization of MFs
• Budget 2018 LTCG Tax on Equity Mutual Funds & Important Implications
• Mutual Fund Investments are subject to Market Risks! – My opinion
• Mutual Funds Capital Gains Taxation Rules FY 2018-19 (AY 2019-20) | Capital Gains Tax Rates Chart
• How to get a consolidated view of Mutual Fund Scheme change list (post SEBI reclassification)?

Kindly note that the above list of best mutual fund schemes is not an exhaustive one. Mutual funds’ returns are not guaranteed, their values/returns change frequently and past performance may not be repeated.

(Featured Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on 22-May-2018)