Best Mutual Funds for Wealth Creation

Wealth creation needs discipline and patience. It needs very long term investments of more than a decade. Those who have made wealth have all invested their funds for ten or fifteen or even twenty years. And for such a long term of investment diversified equity mutual funds are the most preferred category of equity funds by investors. And in diversified, one should select multi-cap or flexi-cap as these funds invest across companies and sectors with varied market capitalization. That simply means, a diversified multi cap equity fund can invest in large cap, small cap and mid cap companies. While large cap companies provide stability to the portfolio, the small and mid cap stocks enhance the returns of the portfolio over long period of time.

Research shows that in terms of risk return characteristics, diversified equity funds have given superior returns than large cap funds. The annual returns of diversified equity funds as a category have been superior to large cap funds in most of the last 13 years – starting from 2004 to till 2015 – excepting in the year 2006, 2008 and 2011.

Even after the great fall in 2008, the diversified equity funds gave almost 85% return in 2009 when the markets rallied, compared to around 65% return by top performing large cap funds. Similarly, after a subdued performance in 2013, the diversified equity funds again bounced back giving 50% return compared to 35% returns by large cap in the year 2014.

So we recommend diversified multicap equity funds for wealth creation in long term.