I want to start SIP of Rs. 5000/- per month in two funds for next 5 years – one good Large Cap Fund and one good Open Ended Index Fund. After my own research I have selected \”ABSL Focused Equity Fund\” under Large Cap and \”ICICI Pru Nifty Next 50 Index Fund\” under Index Fund. My goal is minimum 10% CAGR returns over 5 years. Please let me know your view and if this goal is achievable.
Kindly note that returns are not guaranteed on mutual fund investments. However, an expectation of returns of around 10% is a realistic one.
Aditya Birla Top 100 fund has been renamed as ABSL Focused Equity fund. This fund will now be positioned as Focused fund instead of Large cap fund (after SEBI’s reclassification norms..)
They will invest in large cap stocks but maximum number of stocks could be up tp 30 stocks.
This fund is fine.
Nifty next 50 can have higher risk profile than a large cap one. So, kindly be aware of it.
You may also have a look at Hybrid Equity fund. Ex : HDFC Hybrid Equity fund.
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When it comes to mutual funds, one must remember that it is impossible to guarantee returns, especially when the economic and socio-political climates are going through a change. That said, large cap mutual funds are considered the safest kind of mutual funds and investment tenure of 5 years can provide a decent CAGR; a 10% growth rate is both achievable and realistic. The same principle applies to open ended funds if you choose to remain invested for 5 years.
Of the two funds chosen by you, ABSL Focused Equity Fund has been one of the best performers but as per the new SEBI regulations, it is not recognized as a large cap mutual fund but as a focused fund. The returns accrued from the fund in the last three years are 14.78%, whereas five years returns amount to 16.69% making it a good option.
However, your second selection, ICICI Pru Nifty Next 50 Index Fund has a higher risk profile so you may want to reconsider it if it doesn’t match your risk appetite.