For those looking to grow their wealth significantly over time, mutual funds have always been a popular choice. With a wide range of mutual fund schemes available, finding the best performers can be tricky. A key metric to evaluate mutual funds is the Compound Annual Growth Rate (CAGR).
CAGR is a useful tool for calculating the annual growth rate of an investment over a specified period, smoothing out fluctuations to give a more accurate picture of how the investment has performed. In this article, we will highlight 10 mutual fund schemes that have delivered over 20% CAGR in the last five years, helping you make more informed investment decisions.
What is CAGR and Why Is It Important?
CAGR, or Compound Annual Growth Rate, shows the average annual growth of an investment over a period, assuming all profits are reinvested. The formula for calculating CAGR is simple: you divide the final value of your investment by the initial value, take the nth root (where "n" is the number of years), and subtract one from the result. Essentially, CAGR represents the average yearly growth rate of your investment.
Understanding CAGR is crucial because it smooths out the effects of volatility, giving you a clearer idea of how much your investment has grown annually, rather than focusing on short-term ups and downs. This makes it a reliable measure for comparing the performance of different mutual fund schemes over time.
1. Axis Bluechip Fund – Direct Plan – Growth
The Axis Bluechip Fund is a large-cap fund that has delivered outstanding returns over the past five years, achieving a CAGR of more than 20%. The fund invests in large-cap stocks, which are typically companies with a strong track record and established market presence. By focusing on companies with proven business models and steady growth, this fund has become a popular choice for investors seeking long-term stability and growth.
2. SBI Small Cap Fund – Direct Plan – Growth
For those looking for high-growth opportunities, the SBI Small Cap Fund is an excellent option. It primarily invests in small-cap companies, which are more volatile but have the potential for significant growth. Over the last five years, this fund has delivered a CAGR of over 20%. Given the higher risk associated with small-cap funds, this option is best suited for investors with a higher risk tolerance and a long-term investment horizon.
3. Mirae Asset Emerging Bluechip Fund – Direct Plan – Growth
The Mirae Asset Emerging Bluechip Fund is a hybrid fund that invests in a mix of mid-cap and large-cap stocks. This balanced approach has allowed the fund to consistently deliver impressive returns, with a CAGR of more than 20% over the past five years. The fund targets companies that are still in their growth phase, making it an excellent option for investors looking for growth without taking on the full volatility of small-cap stocks.
4. Kotak Emerging Equity Fund – Direct Plan – Growth
The Kotak Emerging Equity Fund is a mid-cap focused mutual fund that aims to invest in emerging companies with strong growth potential. Over the last five years, it has achieved a CAGR of over 20%. Mid-cap funds like this one are a great option for investors who want to balance growth potential with a moderate level of risk. The fund’s diversified portfolio helps manage risk while tapping into high-growth sectors.
5. UTI Flexi Cap Fund – Direct Plan – Growth
The UTI Flexi Cap Fund is a well-diversified equity fund that invests across large-cap, mid-cap, and small-cap stocks. This flexibility allows the fund to capture growth opportunities across different market capitalisations. Over the past five years, the fund has delivered a CAGR of more than 20%, making it one of the best-performing mutual fund schemes in its category. Investors looking for a diversified fund with strong growth potential would find this fund an appealing choice.
6. HDFC Mid-Cap Opportunities Fund – Direct Plan – Growth
The HDFC Mid-Cap Opportunities Fund is one of the top performing mutual fund schemes in the mid-cap category, with a CAGR of over 20% in the last five years. The fund focuses on identifying mid-sized companies with high growth potential. A well-diversified portfolio across sectors adds stability to this high-growth fund, making it an ideal choice for investors looking for exposure to mid-cap stocks without excessive risk.
7. ICICI Prudential Technology Fund – Direct Plan – Growth
Technology has been one of the fastest-growing sectors in recent years, and the ICICI Prudential Technology Fund has capitalised on this trend. With a CAGR of more than 20% over the last five years, this fund focuses on technology companies, which have seen explosive growth due to rapid advancements in the sector. This fund is best suited for investors looking for sector-specific exposure with high growth potential.
8. DSP Midcap Fund – Direct Plan – Growth
The DSP Midcap Fund has been a top performer in the mid-cap category, delivering a CAGR of over 20% over the past five years. The fund focuses on mid-cap companies that are in the growth phase but have not yet reached their full potential. By identifying companies with strong fundamentals and growth prospects, this fund offers investors a way to tap into high-growth opportunities while managing risk through diversification.
9. L&T Emerging Businesses Fund – Direct Plan – Growth
The L&T Emerging Businesses Fund invests primarily in small-cap and mid-cap companies with high growth potential. Over the past five years, it has delivered a CAGR of more than 20%. Small-cap and mid-cap funds tend to be more volatile, but they offer higher returns over the long term. This fund is suitable for investors with a higher risk tolerance who are willing to stay invested for an extended period.
10. Tata Digital India Fund – Direct Plan – Growth
The Tata Digital India Fund is another technology-focused mutual fund that has benefited from the growth in the digital sector. With a CAGR of over 20% in the last five years, this fund focuses on companies involved in digital services, telecommunications, and software. Given the continued expansion of the digital economy, this fund is ideal for investors seeking sectoral exposure with strong growth potential.
Conclusion
Investing in mutual funds with a high CAGR can be an effective way to grow your wealth over the long term. The mutual fund schemes highlighted in this article have all delivered a CAGR of over 20% in the last five years, making them excellent choices for investors looking to achieve significant returns.
However, it is important to remember that while these funds have performed well historically, past performance is not necessarily indicative of future results. Always assess your risk tolerance and financial goals before selecting a mutual fund, and consider consulting with a financial advisor for personalised advice.