Best Mutual Funds to Invest in India for Long-Term Growth

Investing in mutual funds can help you reach financial growth over time. But with so many options, how do you choose the right one? Explore the list of the top-performing mutual funds in India for long-term investment, discuss their benefits, and explain how to make an informed choice. Whether you’re starting a SIP or investing a lump sum, this guide will help you.

What Are the Best Mutual Funds?

Mutual funds are investment vehicles that pool investors’ money to invest in different assets like stocks, bonds, or gold. The “best” mutual funds often have consistent returns, low expense ratios, and align with your financial goals.

Here’s what to look for when selecting a mutual fund:

• Historical Performance: Check 3- and 5-year returns.
• Fund Manager Expertise: A skilled manager can boost fund performance.
• Expense Ratio: Lower costs mean higher net returns.
• Risk Level: Match it with your risk tolerance.
• Fund Objective: Ensure it aligns with your wealth creation or retirement planning goals.

Top 10 Best Mutual Funds to Invest in India Long Term

Below are the best mutual funds to invest in India long term, based on recent returns.

Overview of the Best Mutual Fund to Invest in 2025

The mutual funds listed above represent some of the top-performing options in India. They were chosen for their potential to deliver strong returns and cater to various investment needs. When considering the best mutual funds to invest in 2025, it is essential to focus on funds that align with your financial goals, risk appetite, and investment timeframe. 

1. Infrastructure Funds

Funds like Bandhan Infrastructure Fund and the Canara Robeco Infrastructure Fund focus on sectors driving India’s growth, such as construction, energy, and transportation. These funds have performed exceptionally well, benefiting from increased investments in infrastructure projects.

2. Mid-Cap Funds

The Motilal Oswal Midcap Fund is perfect for investors aiming to balance growth and stability. It targets mid-sized companies with proven business models and significant growth potential.

3. Small-Cap Funds

High-growth options like Quant Small Cap Fund and Nippon India Small Cap Fund invest in smaller companies, offering substantial returns to those willing to take higher risks.

4. Focused Funds

Funds such as HDFC Focused 30 Fund invest in a concentrated portfolio of high-quality stocks, providing better returns through focused stock-picking strategies.

5. Thematic and Sectoral Funds

Options like the DSP T.I.G.E.R. Fund and ICICI Prudential BHARAT 22 FOF invest in specific themes or government initiatives, making them great for goal-oriented investors.

Also Read: Ultra Short-Term Mutual Funds: Features, Taxation, and Top Picks

Advantages of Mutual Funds 

Mutual funds offer many advantages that can make investing easier and more rewarding for individuals. Here are some of the advantages:

1. Diversification

Mutual funds invest in stocks, bonds, or other assets. This helps reduce risk because even if some investments don’t perform well, others might.

2. Professional Management

Funds are handled by experienced professionals who make decisions based on market research and analysis. This means investors don’t have to worry about managing their investments themselves.

3. Liquidity

Buying or selling a mutual fund is easy, and investors can redeem their units at any time, making it a flexible investment option.

4. Affordable for Everyone

You don’t need a lot of money to invest in mutual funds. Many funds allow investors to start with small amounts, which makes them accessible to people from all financial backgrounds.

5. Transparency and Regulation

Mutual funds are regulated by authorities like SEBI, which ensures transparency and protects investors from fraud.

6. Tax Benefits

Some mutual funds offer tax-saving benefits under Section 80c of the Income Tax Act, which helps reduce taxable income.

Disadvantages of Mutual Funds 

While mutual funds have many benefits, they also come with specific drawbacks that investors should be aware of:

1. Management Fees

Mutual funds charge management fees to the professionals who handle investments. These fees can reduce returns, especially in underperforming funds.

2. Market Risk

Mutual funds are subject to market risks, which means their value can increase or decrease depending on the market. Even a well-managed fund can experience losses during market downturns.

3. Lack of Control

Investors cannot choose the individual stocks or bonds in a mutual fund. All decisions are made by the fund manager, which might not always align with personal preferences.

4. Taxation on Gains

Profits made from mutual fund investments are taxable. Short-term gains (less than 3 years) are taxed at a higher rate than long-term gains, which can impact overall returns.

5. Performance Uncertainty

Past performance does not guarantee future returns. Even top-performing funds can have poor returns during certain market conditions.

Taxation on Mutual Funds

Taxation on mutual funds depends on the type of mutual fund and how long the investment is held. Here’s a simple breakdown of how mutual funds are taxed:

1. Short-Term Capital Gains (STCG)

If mutual fund units are sold within 3 years of investment, the profit is considered a short-term capital gain (STCG). For equity mutual funds, STCG is taxed at 15%, while for debt funds, STCG is added to the investor’s income and taxed as per their tax slab.

2. Long-Term Capital Gains (LTCG)

If mutual fund units are held for more than 3 years, the profit is considered a long-term capital gain (LTCG). For equity mutual funds, LTCG is taxed at 10% if the gains exceed ₹1 lakh in a financial year. Debt mutual funds are taxed at 20%, with the benefit of indexation, which helps reduce the tax burden.

3. Dividend Income

Any dividends received from mutual funds are taxable as income. The tax rate depends on the investor’s income tax slab.

4. Tax Benefits on ELSS Funds

Equity-linked savings Schemes (ELSS) are tax-saving mutual funds. They qualify for tax deductions under Section 80c, up to ₹1.5 lakh per year.

Who Should Invest in Mutual Funds? 

Mutual funds are a good choice for many types of investors, depending on their risk appetite and financial goals. Here’s who should consider investing in mutual funds:

1. New Investors

Mutual funds can be a simple option if you are just starting to invest and don’t know much about stock markets. They allow you to invest in various assets without needing deep market expertise.

2. Long-Term Investors

Mutual funds are great for long-term goals like retirement or buying a home. They tend to grow over time, even though short-term market fluctuations are common.

3. Risk-Averse Investors

If you are not comfortable with taking big risks, mutual funds can offer diversification. This means that even if some investments do poorly, others may do better, balancing out the risk.

4. Investors Looking for Professional Management

Those who like to leave the investment decisions to professionals can benefit from mutual funds, as experienced fund managers manage them.

Best Mutual Funds For Next 20 Years

When looking for the best mutual funds for the next 20 years, focusing on funds with a strong track record, aligned with long-term investment goals, and handled by reputable fund houses is essential. Here are some categories of mutual funds that could perform well over the next two decades, based on historical performance and general investment principles:

1. Growth Funds

Growth funds invest in companies with the potential for higher-than-average returns, making them attractive for long-term investors ready to accept some volatility.

2. Dividend Growth Funds

Dividend funds can provide a stable income stream while benefiting from capital appreciation, specifically if the dividends are reinvested.

3. Index Funds

Index funds are famous for their low fees and long-term growth potential. They passively follow broad market indices, which generally grow over time.

4. Sector Funds

Sector funds can be advantageous if you believe in the future growth of a particular sector, such as healthcare or technology, over the next twenty years.

Conclusion 

Investing in the best mutual funds can help you achieve financial freedom and meet your life goals. It’s important to research, understand your risk tolerance, and align your investments with your objectives. Start small, stay consistent, and watch your wealth grow.