While selecting a fund, you need to analyze the fund from various angles. There are many quantitative and qualitative parameters which can be used to choose at the best equity funds as per your requirements. Furthermore, you need to keep your financial goals, risk appetite and investment horizon in mind.
The following table represents the top 5 large-cap funds in India based on the past 5 year returns. Investors may choose the funds based on a different investment horizon like 10 years returns. You may include other criteria like financial ratios as well.
| Scheme Name | 1Y | 3Y | 5Y |
| -0.47% | 10.57% | 11.11% | |
| 8.26% | 15.11% | 14.61% | |
| 6.83% | 13.67% | 13.24% | |
| 6.33% | 16.80% | 17.70% | |
| Reliance Large Cap Fund - Direct Plan - GrowthLarge Cap Fund | 6.35% | 16.55% | 16.56% |
Source: moneycontrol.com
How to evaluate Best Equity Mutual Funds?
a. Fund returns
Fund performance in terms of the returns on investment is considered key factor for ranking or choosing of funds. However Investors may look for returns for a period of at least 5-10 years.
One may, in fact, select funds which have consistently beaten their benchmark index (ex. BSE, NSE, etc.) They should also fare practically well when compared with their peer set over the longer time frames.
b. Fund history
A strong parentage from a trusted fund house is considered one of the major factors before you invest in a fund. You must have trust in the Asset Management Company (AMC). Ideally it should also have a clean and long business history of at least say 5 years. It ensures that the fund has seen all the market cycle of slumps and rally.
c. Expense ratio
Expense ratio is the annual expense incurred by funds expressed in percentage of their average net asset. This is what the mutual funds charge investors for managing money on their behalf.
d. Financial ratios
With significant risks involved, the risk return ratio becomes an important factor for consideration. In order to judge this, Sharpe Ratio is an important metric associated with equity fund’s performance.
Sharpe Ratio is an indicator of risk-adjusted return. It represents the excess return given by the fund for a given level of risk. Simply put, the higher the Sharpe ratio, the better is the risk adjusted return for that fund.
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