Top Long Term Mutual Funds in India

  • 10 May 2024
  • Read 32 mins read

Long-term mutual funds have great potential and the capacity to earn great profits. However, they carry significant risks and are highly volatile. Therefore, you will need to track their performance periodically.

These long-term mutual funds usually provide investors with high dividend income. These funds suit investors who are comfortable taking risks in exchange for higher returns. Let's learn more about these funds!

What are Long Term Mutual Funds?

Long Duration mutual funds are high-risk, volatile investments that yield significant returns. They require regular reviews to keep informed about their performance. These funds often pay generous dividends and are ideal for investors prepared to take on significant risk in exchange for substantial profits. They purchase shares in various firms and invest the investor's money according to particular criteria. Equity mutual funds, which purchase the stocks or shares of a borrower, provide returns that are dependent on market circumstances. They do not give a fixed return over time, but rather are determined by the company's daily performance hence, the market value of these funds fluctuates daily. Such funds are suitable for those who are ready to assume significant risks. Equity mutual funds are an excellent choice for people ready to take on significant risk in exchange for substantial returns.

 

Top Long Term Mutual Funds to Invest

Some of the best long term mutual funds to invest in are given below:

Fund Name1Y ReturnsFund Size
Quant Infrastructure Fund13.10%₹980
Kotak Infrastructure and Economic Reform Fund24.90%₹1,137
SBI Contra Plan Fund21.90%₹16,337
Motilal Oswal Midcap Fund20.40%₹5,953
Quant Tax Plan Fund9.40%₹4,925
SBI Magnum Mid Cap Fund19.20%₹13,245
Axis Small Cap Fund21.80%₹16,175
SBI Consumption Opportunities Fund16.30%₹1,632
Bandhan Tax Advantage (ELSS) Fund16%₹5,160
ICICI Prudential Value Discovery19.20%₹33,939

Disclaimer -  The market capitalisation mentioned above is accurate as of the date of 19 April, 2024. However, conducting your research before making any investment decisions in these stocks is important.

Overview of the Best Long Duration Mutual Funds

Let’s look into a detailed overview of the best MF for long term 

Quant Infrastructure Fund Direct Growth:

The fund has generated 41.75% annualised returns over the last three years and 36.53% over the last five years. The Equity section includes the Quant Infrastructure Fund within the Quant Mutual Funds category which is one of the best mutual fund to invest for long term. The NAV, as of Apr 18, 2024, is Rs 39.50, and the PE ratio is  1.97%. The primary goal is to provide long-term development prospects and capital appreciation through investments in a portfolio of infrastructure-focused businesses.  

The Quant Infrastructure Fund, established in 2017, requires a minimum investment of ₹1,000 via SIP and ₹5,000 in a lump sum.

Motilal Oswal Midcap Fund Direct Growth:

The Motilal Oswal Midcap Fund, launched on Feb 24, 2014, has generated 38.12% annualised returns over the last three years and 27.77% over the last five years. It is within the Motilal Oswal Mutual Funds Equity category. ₹91.946 as of 14 Apr 2024 - NAV, PE Ratio is 0.61. The fund invests in mid-cap firms that have growth potential and advantages to generate long-term capital appreciation.

Minimum Investment Amount: A lump sum or SIP investment in the Motilal Oswal Midcap Fund must be at least ₹500.

Quant Mid Cap Fund Direct Growth

The fund has generated annualised returns of 37.75% over the last three years and 32.8% over the last five years. The Quant Mid Cap Fund is a good mutual fund for long term investment, launched on Jan 01, 2013, is a Quant Mutual Fund in the Equity sector. The PE ratio is 1.81. The NAV is ₹240.657 as of 15 Apr 2024. The fund aims to invest in a portfolio of mid-cap firms to provide long-term growth possibilities and financial appreciation.  

The Quant Mid Cap Fund requires a minimum investment amount of ₹1,000 to be invested via SIP and ₹5,000 to be invested in lump sum.

Kotak Infrastructure and Economic Reform Fund Direct Growth

The fund has generated 36.08% annualised returns over the last three years and 25.68% over the last five years. The Kotak Infrastructure and Economic Reform Fund launched on 04 Aug 1994 is within the Kotak Mahindra Mutual Funds Equity category. The Pe ratio is 0.65, and the NAV is ₹69.05. It aims to produce long-term capital growth from a diversified portfolio of equities and equity-related securities of Indian enterprises engaged in economic development. 

The Kotak Infrastructure and Economic Reform Fund requires a minimum investment of ₹100 via lump payment and ₹100 via SIP 

Quant Tax Plan Direct Growth

The fund has generated 34.96% annualised returns over the last three years and 30.25% over the last five years. The Equity section includes the Quant Tax Plan Fund within the Quant Mutual Funds category. Its NAV is Rs 404.38, and its PE Ratio is  0.76. The fund seeks to have extra advantages of income tax savings beyond increased anticipated returns. 

The Quant Tax Plan Fund launched in 2017 requires a minimum investment value of ₹500 in a lump sum and ₹500 in an SIP.

Tata Small Cap Fund Direct Growth

The fund has generated a return of 33.25% annually over the last three years and 28.64% over the last five years. The Tata Mutual Funds Equity category is a good long term mutual funds category, launched on November 13, 2018. It includes the Tata Small Cap Fund. The PE ratio is 0.29, and the NAV is Rs 37.77. The fund primarily invests in equity and equity-related instruments of small-cap companies to produce long-term capital appreciation. 

Minimum Investment Amount: To invest in a Tata Small Cap Fund, you need to make a lump contribution of ₹5,000 or a systematic savings plan of ₹100. 

Quant ELSS Tax Saver Fund Direct Growth

The Quant ELSS Tax Saver Fund is a Quant Mutual Fund, launched on Jan 01, 2013 in the Equity category that has generated 32.66% annualised returns over the last three years and 33.31% over the last five years. The NAV is 410.30, the PE ratio is 0.76% and the scheme invests mostly in growth-oriented equity shares to produce capital appreciation. The secondary objective is to give dividends and other income. 

Minimum Investment Amount: ₹500 is the minimum amount needed to invest via lump sum or SIP in the Quant ELSS Tax Saver Fund. 

SBI Contra Direct Plan Growth

The SBI Contra Fund launched on Jan 01, 2013, has generated 32.62% annualised returns over the last three years and 25.78% over the last five years. The SBI Mutual Funds' Equity category includes the SBI Contra Fund. The PE ratio is 0.64%, and NAV is 370.86 aims to provide the investor with the opportunity for long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities following a contrarian investment strategy. 

Minimum Investment Amount: A lump investment of ₹5,000 or a SIP of ₹500 is needed to invest in the SBI Contra Fund. 

Quant Large and Mid Cap Fund Direct Growth

The Quant Large and Mid Cap Fund, launched on Jan 01, 2013, is placed within the Quant Mutual Funds Equity category and has earned a return of 31.74% annually over the last three years and 26.86% over the last five years. It seeks to generate capital appreciation and provide long-term growth opportunities by investing in a portfolio of large and mid-cap companies. PE ratio is 0.75%, NAV is Rs 116.40 

Minimum Investment Amount: A lump sum investment of ₹5,000 or a systematic savings plan of ₹1,000 is needed to invest in Quant Large and Mid Cap Funds. 

JM Flexicap Fund Direct Plan Growth

The fund has earned a return of 28.93% annually over the last three years, and over the last five years, it has earned a return of 23.78%. The JM Flexicap Fund launched on Jan 01, 2013, is a member of the JM Financial Mutual Funds Equity category. NAV is ₹97.45, PE Ratio- 0.23%, aims at investors who are looking to invest money for at least 3-4 years and looking for high returns

Minimum Investment Amount: A lump investment of ₹1,000 or a SIP of ₹100 is needed to invest in the JM Flexicap Fund.

Factors to Consider When Choosing Long-Term Mutual Funds

There are many factors to consider to make informed investment decisions when selecting long-term mutual funds. 

Investment Goals:

 You can set goals for your investments, such as saving money for your future, your child's education, or other financial objectives. You need to know why you are investing so that you choose a fund that suits your long-term goals and creates the right mutual fund portfolio. 

Risk Tolerance:

The levels of risk in long-term mutual funds can change. So, consider market fluctuations when choosing funds.

Fund Type:

There are many kinds of long-term funds, such as debt, hybrid, and equity. You need to make sure the fund type fits both your risk tolerance and your investing goals.

Historical Performance:

You can review the fund's previous results. This can offer valuable information on the fund's performance in changing market environments, even though historical performance does not guarantee future returns. 

Fund Manager Expertise:

A fund's performance is affected by its fund manager. Check the experience and performance history of the fund manager managing the long-term investment you are considering. 

Expense Ratio:

The expense ratio affects your returns. A lower expense ratio indicates that a larger portion of your investment is used to make profits. Compare expense ratios to make decisions that will save money.

Features of the Best Mutual Fund For Long Term

Some of the features of the best MF to invest for long term are as follows:

Long Investment Period: 

These funds have an investment period of five years or more. They offer the chance to profit from the financial markets' long-term development potential and the power of compounding. 

Risk and Return:

 This risk may result in better returns over time. Investors should maintain their focus on their long-term objectives while being ready to bear market swings. 

Diversification:

Investing in different asset types, including stocks, debt securities, and other financial instruments, allows fund managers to diversify their portfolios. This diversity can improve overall portfolio stability and help in risk distribution. 

Professional Management:

Professional fund managers actively manage long-term mutual funds with strong returns and make investment decisions for clients. These professionals seek to recognise opportunities and efficiently handle risks.

How to Choose the Best Long Duration Mutual Funds for Investment? 

Here are some tips on how you can choose the best long duration mutual funds for investment: 

Set financial goals:

Whether you’re looking to purchase a home or retire, it’s important to know what you’re investing for. Knowing your goals will help you select funds that match your investment goals and risk tolerance.

Check Risk:

Determine your risk tolerance, which refers to your ability and tolerance for price changes in your investments. If instability makes you uncomfortable, consider less risky options such as debt funds. 

Fund Type:

Mutual funds have different types depending on your risk profile and investment goals. For example, equity funds invest mainly in equity securities, debt funds invest mainly in fixed-income securities such as bonds and hybrid funds invest in both equity and bond instruments. Find the fund type that matches your risk tolerance and financial goals. 

Expense Ratio:

The annual fee charged by the fund to cover operating expenses is represented by the expense ratio. Opting for funds with lower expense ratios can boost your overall returns as it allows more of your investment returns to remain in your pocket instead of being paid out in fees.

Tax Efficiency:

Take into account the tax consequences of your investment decisions. Some categories of funds might provide tax benefits, like dividends or capital gains that are exempt from taxes, thereby boosting your post-tax returns.

How to Invest in the Best Long Duration Mutual Funds?

Purchasing mutual funds or the best SIP for the long term is a smart financial choice. You can read through the step-by-step guide given below:

Identify Your Financial Goals

First, determine your long-term financial goals, such as home purchase, education, or retirement. Knowing your objectives will make selecting a fund easier. 

Check Your Capacity for Risk

You need to know your tolerance for risk if you are okay with market volatility. Your ability to take on risk will help you choose the best kind of long-term mutual fund.

Select the Type of Fund

You can choose whether you want to invest in debt funds, equity funds, or a combination of both based on your objectives and tolerance for risk. Long-term debt funds offer stability, while equity funds typically have greater growth potential.

Research Fund Performance

You must check the past results of well-known mutual funds that interest you. Consider variables such as the fund's annual returns, track record, and ability to tolerate economic changes.

Reputable Funding Company

You have to select a mutual fund from a reputable and well-established fund house. Check their past performance, customer service, and fund manager's level of experience.

Keep a Budget

You should create a budget that is in line with your capabilities, whether you want to begin with a lump payment or a Systematic Investment Plan (SIP) 

Monitor and Adjust

Keep a regular eye on your investments and change them as necessary. Be proactive in managing your portfolio as the market and your financial objectives change over time

Why are Equity Funds the Best for the Long Term?

Equity funds are frequently regarded as the best choice for long-term investment due to several significant factors. To begin with, they have a track record of delivering the potential for substantial returns, surpassing other asset classes such as bonds or cash over extended time frames. Additionally, equity funds offer diversification by investing in a diverse array of stocks spanning various sectors and industries, effectively reducing risk.

Furthermore, skilled professionals oversee the management of these funds, conducting thorough research and carefully choosing stocks to maximise returns for investors. In addition, equity funds provide liquidity, enabling investors to conveniently purchase and sell fund units whenever necessary.  

Equity funds have demonstrated strength throughout history, making them an appealing choice for investors looking to build wealth and achieve capital appreciation over the long term, despite the possibility of instability.

How do Long Duration Mutual Funds Work?

Long duration mutual funds function differently from their competitors due to a special approach. This is an explanation of how these funds operate: 

Extended Maturity Period:

Bonds and securities with longer maturities are the main investments made by long-duration funds. These may last for ten, thirty, or even more years. Investors can profit from higher interest rates and possibly capitalise on capital appreciation when interest rates decrease due to the prolonged maturity period.

Interest Rate Sensitivity:

Long-term funds are sensitive to changes in interest rates. Falling interest rates increase the appeal of current, higher-yielding bonds, which could result in capital gains. On the other hand, a rise in interest rates may cause bond prices to drop, impacting the fund's net asset value (NAV). 

Income Generation:

 Investors looking for a steady stream of income might choose these funds. They are a popular option for retirees and other people seeking a reliable source of income because they offer regular interest payments.

Risk and Volatility:

 Long-duration funds are sensitive to interest rates, and they may be more volatile. Investors should evaluate their risk tolerance and be ready for changes in NAV before investing. 

Portfolio Diversification:

These funds frequently invest in various corporate bonds, government securities, and other fixed-income instruments. This diversification can help distribute risk among different types of debt instruments.

Tax Efficiency:

Long-duration funds may provide tax advantages if held for a longer amount of time. Long-term capital gains (LTCG) are tax-efficient investments since their tax rate is often lower than that of short-term gains.

How are Returns Calculated on Long Term Mutual Funds?

It is essential to understand the calculation of returns while checking the top long-term mutual funds available in India. Here's a quick overview of the procedure: 

1.Net Asset Value (NAV):

NAV is the market value of the fund per unit. Liabilities are subtracted from the overall asset value, and the remaining units are divided to arrive at the result. NAV is computed daily.

2.Holding Period Returns:

 Performance is calculated over a predetermined period using this method. The equation is easy to understand: 

Holding Period Return (%) = [(Final NAV – Initial Investment) / Initial Investment] x 100 

3.Compounded Annual Growth Rate (CAGR):

CAGR gives accurate information on long-term performance by considering compounding effects. The formula is: 

CAGR (%) = [(Ending NAV / Beginning NAV) ^ (1/n) – 1] x 100

4.Total Returns:

Consider all profits and earnings, not only the increase in NAV. Divide this amount by your initial investment. 

5.Volatility and Risk-Adjusted Returns:

These measures evaluate a fund's performance in terms of risk levels, but they do not compute returns directly. Measures such as the Sortino ratio and the Sharpe ratio provide information.

Example of a Long Duration Mutual Fund

Let's use an example to show how mutual funds function as long-term investments. Use the following formula to determine returns:

Return (%) = [(Final NAV – Initial Investment) / Initial Investment] x 100

Scenario: 

You put ₹100,000 in a long term fund at the start of the year that specialises in government securities.

Interest Rate Movement:

The fund's NAV rises in line with decreasing interest rates throughout the year, which is reflected in the increasing value of the portfolio's current holdings.

Return Calculation:

 If the NAV hits ₹110,000 at year's end, you will have made a 10% return on your original ₹100,000 investment, or ₹10,000 gain. 

This example shows how long-term funds might earn substantial gains if interest rates drop. Remember that these funds are subject to interest rate risk, which means that rising rates may impact returns. Therefore, for possible rewards, it is essential to keep a careful eye on interest rate changes and stick to a long investment period.

When Should You Invest in Long-Duration Mutual Funds?

This is situational. If you don't want to invest directly in stocks (because you have better things to do or don't feel like it), you can utilise equity mutual funds (described below). Debt mutual funds (described below) can help you save money on taxes compared to a fixed or recurring deposit while also providing superior returns. The clearer you are about your needs, the faster and more confident you will judge mutual funds - which applies to everything in life!

Who Should Invest in Good Long-Term Mutual Funds?

People with longer-term investment goals like buying a house or automobile,  retirement, supporting a child's education or marriage, or paying off debt are known as long-term investors. Long-term investment plans are appropriate for people who can tolerate the risks involved in long-term market changes in exchange for significant returns. Investing in a systematic instalment plan (SIP) helps to divide the cost over several years, avoid cost fluctuation, and take advantage of compound interest. Investors in mutual funds, for the long term, should be patient and trust the well-considered decisions made by fund managers. Consulting with experts is advised to assist you with finding the best mutual funds for long-term investing in India.

Taxation on the Best Mutual Fund For Long Term 

Equity mutual funds are known for their tax efficiency and are subject to holding period-based taxes. Long-term investments are those kept for more than a year; they are subject to a 10% Long-Term Capital Gains Tax (LTCG) with a 4% Cess on gains over INR 1 Lakh. Equity funds are subject to a Dividend Distribution Tax (DDT), whereby dividends are applied to the investor's taxable income based on their tax slabs. Additionally, dividends over INR 5,000 are subject to a 10% TDS.

Investments sold before a year incur a 4% cess and a 15% short-term capital gains tax (STCG). Investors are additionally assessed a securities transaction tax of 0.001% when they sell their assets. Under Section 80C, ELSS funds provide tax savings; alternative tax-saving choices include PPF. Savings of up to INR 1.5 lakhs are possible through EPF, NPS, NSC, and SCSS.

Mutual funds, particularly large-cap, mid-cap, and small-cap funds, are good long-term investments for people who lack the time or expertise to conduct in-depth securities research. Nonetheless, to guarantee consistency with financial objectives and uphold a disciplined approach, these assets must be reviewed and rebalanced regularly, ideally once a year.

Risks of Investing in the Best Mutual Fund to Invest in Long Term

It’s important to assess the risks involved while investing in long-term mutual funds. Below is a summary of some potential issues to be aware of:

Market-Linked Risks:

Long-term mutual funds, especially those with a large equity investment, are more prone to market-linked events. The performance of the fund's stocks might have a big impact on the value of your investment. Understanding the stocks that your selected fund invests in is essential. 

Return Uncertainty: 

There is no assurance that mutual funds will earn large returns. If your fund, for example, loses money one year but does very well the next, the total profit, when averaged throughout your investing tenure, might not look as good. 

Redemption at Current NAV: 

Long-term mutual funds allow you to take withdrawals at any time, but the amount you can withdraw depends on the current Net Asset Value (NAV) of the fund as a whole. This implies that your investment corpus will reflect any losses proportionately incurred by the fund. 

The Difference Between Mutual Funds with Long and Short Durations

Here is the difference between mutual funds with long and short durations:

Aspects of DifferencesLong Term Mutual FundsShort Term Mutual Funds
Investment PeriodIt is for a long term, typically over several years.Typically spans from a few days to three years.
Risk ToleranceSuited for investors willing to undertake some risk, especially in equities.Ideal for low-risk investors who prefer to avoid equities.
Wealth CreationLong-term investments are effective for wealth creation over time.Suitable for shorter-term financial objectives.
GoalsSuitable for goals like retirement planning, purchasing a home, or funding children’s education.Suitable for goals like vacations, vehicle purchases, or shorter-term financial milestones.
Investment OptionsConcentrates on equity mutual funds and emphasises higher market exposure.Mainly into debt mutual funds, often surpassing fixed deposits in post-tax returns.
TaxationCapital gains taxation at the investor’s IT slab rate from April 1, 2023.Also subject to risks, including credit and interest rate risk, and do not guarantee returns.
LiquidityIt is less liquid as they are designed for long-term commitment.More liquid, with options like liquid funds serving as alternatives to savings accounts.

Advantages of Investing in the Best Mutual Fund For Long Term

There are several advantages to investing in a long-term mutual fund plan, each of which meets distinct financial goals and needs:

Strategic Financial Planning:

Strategic financial planning is essential for long-term investments. Investors want to achieve stress-free goals in life by planning ahead for future financial goals. Financial readiness makes it easier to achieve these goals with a well-defined plan supported by instruments like lump sum mutual fund calculators for return estimation and SIP calculators.

Using the Compounding Effect:

A long-term investment period introduces the compounding effect, which earnings increase on previous gains. Compounding greatly increases profits over 5, 10, or 30 years; systematic investment plans (SIPs) multiply this effect even more.

Consistent Control of Market Volatility:

 Long-term investments offer a good method of managing market volatility. Investors become less vulnerable to major changes and have a greater understanding of the market environment. This results in more consistent and possibly better returns over time.

Reducing the Financial Strain:

Investing early reduces financial strain, especially regarding major goals like retirement, college, or marriage. Early investments use compounding to lower rupee costs and increase overall profits. They also offer a stronger defence against the short-term swings in the market.

Conclusion
A long-term mutual fund from a stock market app is a good option for investors with certain risk tolerances and financial objectives. It is for investors who are ready to make a long-term commitment. They are a good option due to their potential for larger returns and the compounding effect. However, it's important to carefully consider your risk tolerance and match these funds with your financial goals. Long-duration mutual funds can be a useful addition to your investing portfolio, whether you're saving for your child's college education, your own retirement, or just want to take advantage of compound interest. You should know that having a well-thought-out investing plan aligned with your financial goals is essential to success.

Faqs on Mutual Fund For Long Term

Equity funds are a good option for long-term investments because they have the most profit potential. Selecting a growth mutual fund option will enable you to compound your gains over time, which will help you reach your long-term objectives.

Selling equities shares you've owned for more than a year can help you realise long-term capital gains on mutual funds. Without the benefit of indexation, you must pay a 10% tax on long-term gains that exceed Rs 1 lakh.

The consequences of selling your mutual fund investments differ according to the type of fund. You can sell them at any moment. Selling a fund before the end of its holding period may result in an early redemption fee from some funds.

Long-duration funds have a longer investment period, which exposes them to increased risks related to interest rate swings during economic cycles and the full business cycle.

The average annual return from long-duration funds was 3.76%, and the 3- and 5-year annualised returns were 6.1% and 6.15%, respectively.