Best Mutual Funds for Long Term

Investing in mutual funds for the long term is one of the smartest ways to build wealth steadily. With the power of compounding and disciplined investing, even small amounts can grow significantly over time. Long-term investments help you ride through market ups and downs, reducing the impact of short-term volatility.

Choosing the right mutual funds is important for achieving your financial goals. Equity funds, balanced funds, and even some debt funds can perform well over longer periods. By focusing on strong fundamentals, consistent returns, and reliable fund management, investors can create a solid foundation for their future. In this article, we explore some of the best mutual funds to invest in for the long term.

What are the Best Mutual Funds?

The best mutual funds are those that offer consistent returns, manage risk effectively, and help investors meet their long-term financial goals. These funds are managed by experienced fund managers who carefully select a mix of stocks, bonds, or other assets. Good mutual funds show strong historical performance, low expense ratios, and a clear investment strategy. They are also transparent about their holdings and regularly update investors on fund performance. Choosing the right fund depends on your risk appetite, investment horizon, and future financial needs.

Best Mutual Funds

Here is a carefully selected list of the best mutual funds. These funds have shown strong performance across one, three, and five years, making them attractive for long-term investors.

Overview of Best Mutual Funds

DSP Top 100 Equity Fund - Direct Plan - Growth

DSP Top 100 Equity Fund has an AUM of ₹5,070.17 crore. It focuses on large-cap companies, delivering a strong 26.49% return in one year and 23.34% over five years, making it a stable option for long-term growth.

Motilal Oswal Midcap Fund - Direct Plan - Growth

Motilal Oswal Midcap Fund, managing ₹26,028.34 crore, focuses on mid-sized companies. It posted an impressive 36.57% one-year return and 38.25% five-year return, making it ideal for investors seeking aggressive long-term growth.

Edelweiss Mid Cap Fund - Direct Plan - Growth

Edelweiss Mid Cap Fund holds ₹8,633.85 crore in AUM. It has delivered a strong 34.31% one-year return and 34.86% over five years, proving its ability to tap into the mid-cap growth potential effectively.

HDFC Focused 30 Fund - Direct Plan - Growth

HDFC Focused 30 Fund manages ₹17,226.97 crore and focuses on a concentrated portfolio of 30 high-potential stocks. It reported a 29.23% one-year return and 32.35% return over five years, reflecting strong performance consistency.

Nippon India Large Cap Fund - Direct Plan - Growth

With ₹37,546.38 crore AUM, Nippon India Large Cap Fund invests in leading blue-chip companies. It offered a solid 24.58% one-year return and a 28.32% five-year return, making it a reliable long-term choice.

Bandhan Focused Equity Fund - Direct Plan - Growth

Bandhan Focused Equity Fund has ₹1,685.24 crore under management. This fund focuses on a limited number of quality stocks, returning 25.97% over the past year and 23.49% over five years, suitable for focused investors.

Motilal Oswal Large and Midcap Fund - Direct Plan - Growth

Motilal Oswal Large and Midcap Fund manages ₹8,712.99 crore. It offers a blend of large and midcap opportunities, delivering 33.07% one-year and 30.65% five-year returns, perfect for balanced long-term growth.

Baroda BNP Paribas Large Cap Fund - Direct Plan - Growth

Baroda BNP Paribas Large Cap Fund manages ₹2,432.03 crore, focusing on top large-cap stocks. With a one-year return of 22.35% and five-year return of 22.75%, it offers stable and steady growth for conservative investors.

DSP Natural Resources and New Energy Fund - Direct Plan - Growth

DSP Natural Resources and New Energy Fund, with ₹1,232.11 crore AUM, focuses on sectors like energy and resources. It returned 21.77% over the past year and 31.39% over five years, suitable for thematic investors.

Bank of India Manufacturing & Infrastructure Fund - Direct Plan - Growth

Bank of India Manufacturing & Infrastructure Fund, managing ₹513.93 crore, focuses on the manufacturing and infrastructure sectors. It posted a strong 29.43% one-year return and a 32.89% five-year return, ideal for sector-focused investors.

Advantages of Best Mutual Funds

Professional Management

Mutual funds are managed by experienced professionals who use research and analysis to make smart investment decisions on your behalf.

Diversification

By investing in a variety of assets, mutual funds reduce the risk linked to a single investment. This helps balance your portfolio even during market volatility.

Liquidity

Most mutual funds offer high liquidity, allowing you to buy or sell units easily whenever needed, providing flexibility with your investments.

Affordability

You can start investing with small amounts through SIPs. This makes mutual funds accessible to both small and large investors.

Transparency

Mutual funds regularly publish fact sheets, portfolio holdings, and performance reports, helping investors stay informed and confident.

Convenience

Investing in mutual funds is simple, with online platforms and easy documentation making the process quick and hassle-free.

Tax Efficiency

Certain types of mutual funds, like ELSS, offer tax benefits under Section 80C, helping you save while growing your wealth.

Disadvantages of Best Mutual Funds

Market Risk

Mutual funds are exposed to market fluctuations. Even the best-performing funds can lose value during periods of high volatility or market downturns.

Management Fees

While professional management is valuable, mutual funds charge fees and expenses that can reduce your overall returns, especially if the fund underperforms.

Exit Loads

Some mutual funds charge a fee if you redeem your investment early. This exit load can eat into your gains if you need quick access to your money.

No Guaranteed Returns

Unlike fixed deposits or government bonds, mutual funds do not guarantee returns. Their performance depends entirely on market movements and fund strategy.

Fund Manager Changes

Frequent changes in fund managers or investment style can affect the fund’s consistency and long-term performance.

Need for Regular Monitoring

Investors must track their funds regularly to ensure they remain aligned with their financial goals and risk tolerance.

Taxation on Best Mutual Funds

Tax rules for mutual funds have recently changed. If you sell equity mutual fund units within one year, the short-term capital gains will now be taxed at 20%, compared to 15% earlier. For investments held longer than one year, gains are considered long-term. The tax exemption limit has increased from ₹1 lakh to ₹1.25 lakh. However, gains above this limit will now be taxed at 12.5%, up from 10%. 

Additionally, the government has removed the indexation benefit, which earlier helped reduce taxable gains by adjusting for inflation. This change applies across all mutual fund categories. Investors should plan carefully and understand these updated rules before making mutual fund investments.

Who Should Invest in the Best Mutual Funds?

Long-Term Investors

Those looking to build wealth steadily over 5–10 years or more can benefit greatly from investing in mutual funds.

First-Time Investors

Mutual funds offer a simple and affordable entry point for beginners who want professional management without needing deep market knowledge.

Goal-Oriented Savers

Investors planning for goals like children's education, home purchase, or retirement can use mutual funds to grow their savings over time.

Risk-Aware Investors

People who understand market risks but are willing to accept short-term fluctuations for better long-term returns should consider mutual funds.

Diversified Portfolio Seekers

Investors who want exposure to different asset classes like equities, debt, and gold can easily diversify their portfolio through mutual funds.

Conclusion

Investing in the best mutual funds is a proven way to build wealth and achieve long-term financial goals. With professional management, diversification, and flexible investment options, mutual funds suit a wide range of investors. However, it is important to choose funds carefully based on your risk appetite, investment horizon, and financial targets. 

Staying invested for the long term and reviewing your portfolio regularly can help you get the best results. Always remember, consistency and patience are key when it comes to mutual fund investing. With smart planning and the right choices, mutual funds can play a major role in securing your financial future.