Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Top Equity Mutual Funds That Offer Best Returns

Stock-Markets / Stock Markets 2019 Jul 15, 2019 - 04:37 PM GMT

By: Ruchi_Mahajan

Stock-Markets Mutual funds that invest in stocks are called as the ‘Equity mutual funds’. These funds can be actively or passively (index fund) managed and are also called as stock funds. And the categorization of the Equity mutual funds is done on the basis of the size of the company, geography and the investment style of the holdings in the portfolio.

Usually, equity funds invest more than 65 percent of their portfolio in stocks. Equity funds may experience frequent fluctuations, which makes them a perfect investment option for aggressive investors. Top mutual funds (equity/stock) tend to give higher returns when invested over the medium to long term horizon. Any investment in stocks is considered to be a risky investment. Due to the risk involved, you need to analyze the funds on various parameters before investing in one.

Breaking Down Top Equity Mutual Funds

Are you looking at long-term capital gains or an increase in the current source of income? Will the money be used for retirement purpose, or to fund education loan? Identifying a goal is imperative in whittling down the universe of more than 8,000 variants of mutual funds that are available to the investors.

You need to consider your investment horizon and risk appetite while investing in stock funds. Investors with an investment horizon of more than 5 years may consider Equity mutual funds.  Because of market fluctuations, it will not work well for short-term investors.

Additionally, you also need to consider your risk tolerance. Would you be able to deal with dramatic swings in the portfolio value of the funds? Or, you would like to go for conservative investment options? Returns and risks are directly proportional and to serve your purpose, you need to balance your ability to tolerate risk and the desire for returns.

A budding investor can go for large-cap equity mutual funds that are equity shares of top performing companies that assure stable returns in the long run. On the other hand, experienced investors can opt for diversified equity funds as the best combination of risk and return.

Things to Consider as an Investor

There are multiple options available when it comes to equity funds, and for budding investors, these options may seem overwhelming.  Let see how it needs to be done-

1. Investment Horizon

Equity Mutual funds are a viable option for investors with long-term investment goals. In the short run, the funds experience a lot of fluctuations. If the investment horizon is more than 7 years then the fluctuation averages out, making it a suitable investment choice. Stock funds, thus, are able to provide returns in the range of 10 to 12 percent. Even in top mutual funds, you would need to stick around for at least for the said period to allow the fund to reach its full potential.

2. Fund Objectives

These robust investment strategies are a great option for wealth accumulation. The stocks are picked on the basis of the investing style; it can either be growth investing or value investing. Value investing is basically investing in undervalued funds whose price will eventually rise and earn profits.

3. Type of Funds

Equity mutual funds are further classified into large-caps, mid-caps, and small-cap funds.  Large-cap funds are for conservative investors with low-risk appetite seeking higher returns. Returns in Small-cap & mid-cap funds can be extremely high or extremely low, which makes them a perfect option for investors with a high-risk appetite. Not only this, for a diversified portfolio you can consider investing in multi-cap funds the invest your money across different capitalizations.

4.  Market Risk

Equity funds are vulnerable to market risks. The Stock funds are affected by the movements of Global markets. An overall fall or rise in the value of the index leads to a variation in the fund value of equity mutual funds. Volatility in equity funds is higher than money market funds or debt funds.

5. Financial Goals

Top equity mutual funds are ideal for achieving long-term financial goals like retirement planning or wealth accumulation. Equity funds being a high risk-high return haven help in generating wealth which may help you to pursue your passion in life and retire early.  

6. Cost

Equity funds charge an expense ratio to manage your invested amount. Equity mutual funds that are actively-managed have a higher expense ratio, unlike index funds.

How to Evaluate Top Equity Mutual Funds?

  • Fund Returns

The most important parameters in selecting or ranking funds are the performance of the funds in terms of the returns on the investment. Investors may look for returns for an investment horizon of at least 5 to 10 years.

However, the top mutual funds to select are the ones that constantly beat their benchmark index. They should also perform reasonably well when compared with other funds over longer time frames.

  • Fund history

Choose funds that have a strong background and belong to a trusted fund house before you invest your money. It is important to have trust in the asset management company. Preferably it should also have a clean and long proven business record of more than 5 years. It will ensure that the funds have seen all the market cycle of slumps and rally.

  • Expense Ratio

As an investor, you must consider this parameter while selecting a mutual fund scheme or compare it with its peers one basis of the expense ratio that is charged by the fund house. It is the ratio that measures per unit cost of managing a fund. To derive the ratio the fund's total expenses are divided by its assets under management.

  • Financial ratios

The risk-return ratio is also a significant factor because of the risks involved. The sharp ratio is an important indicator of the risk-adjusted returns. For a given level of risk, this ratio denotes the excess return that the fund will provide. Simply put, if the Sharpe ratio is higher than the risk-adjusted return of that particular fund will also be better.

 Key Takeaways

  • Before investing in top equity mutual funds, you must identify your goals for the investment being made
  • Potential investors should take into consideration their personal risk tolerance towards dramatic swings in the portfolio value
  • An investor must also decide the duration of the investment

Deciding Top Equity Mutual Funds
Clearly, you need to analyze equity funds from a different angle before investing in the funds.  There are various qualitative and quantitative parameters that can be used to decide the top mutual funds as per your requirements. Also, you need to keep your risk appetite, investment horizon, financial goals, and financial ratios in mind.

The Bottom Line
It can be complex to invest in equity funds sometimes. Those who do not have enough financial knowledge and are finding it challenging to understand, then you can simply decide on the above-mentioned parameters. You can invest in selected funds in a paperless and hassle-free manner.

By Ruchi Mahajan

© 2019 Copyright Ruchi Mahajan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules