3 equity schemes offer over 50% returns in three years

Three equity schemes have offered more than 50% returns in the last three years. Equity mutual funds are meant for long-term investments, say, five to seven years. However, many investors look at the three-year returns of schemes. That is what prompted ETMutualFunds to look at the short-term performance of equity and equity-oriented schemes. We looked at the trailing returns and found that three equity schemes offered 53-62% returns in a three-year horizon.

These three schemes were from the small cap and sectoral/thematic categories. Sectoral/thematic funds have been offering good returns in the three-year horizon. According to the recent AMFI data, sectoral/thematic funds received the highest inflows in March 2023.

Quant Small Cap Fund, a small cap fund, was the topper. The scheme offered 62.34% returns in three years. The scheme was benchmarked against Nifty Smallcap 250 – TRI. The benchmark offered 40.06% in three years. The category offered an average return of 40.72% in three years.
ICICI Prudential Commodities Fund was the second in the list. The commodity fund offered 53.81% in the last three years. The scheme was benchmarked against Nifty Commodities – TRI. The benchmark offered 34.27% in three years. The category offered an average return of 26.71% in three years.

Quant Infrastructure Fund occupied the third place. The infrastructure scheme offered 53.20% in three years. The scheme was benchmarked against Nifty Infrastructure – TRI. The benchmark offered 28.73% in three years. The category offered an average return of 35.61% in three years.

These three schemes are highly risky. That is why small cap schemes and sector/thematic schemes like commodity and infrastructure funds are not recommended to new and inexperienced investors. These schemes are extremely risky and volatile. They tend to get into phases or cycles. A prolonged depressing cycle would unnerve most inexperienced investors. They often stop or abandon their investments. That is why these schemes are not recommended to new investors.

Mutual fund advisors also tell investors to invest in such schemes only if they have very long investment horizon. They typically ask investors to have an investment horizon of at least seven to 10 years. This is mainly because a long investment horizon will help to smooth out the volatility in the market. It also helps to recoup the losses if any.Regular investors need not be disheartened that their risk profile will not allow them to invest in these schemes. Such investors can invest in a flexi cap scheme. A good flexi cap scheme would help them to take meaningful exposure to sectors and themes that are doing well without exposing them to very high risk.