Looking for Best Equity Mutual Funds to Invest for 3 Years? Check These 3 Funds With Over 25% Gain

3 Equity Mutual Funds With Over 25% Three-Year Gains

The latest analysis of equity mutual funds identified three schemes that delivered more than 25% returns over the three-year period. Two of the funds belong to the small-cap category, while the third is a sectoral healthcare fund.

Here are the three funds highlighted in the report:

Mutual FundCategory3-Year ReturnAUMExpense RatioRatingITI Small Cap FundSmall Cap25.31%₹3,454 crore0.86%5-starBandhan Small Cap FundSmall Cap25.26%₹31,103 crore0.61%5-starUTI Healthcare FundHealthcare Sector25.04%₹14,433 crore1.33%4-star

The figures are based on the latest ET report and represent historical performance; they should not be treated as forecasts of future returns.

1. ITI Small Cap Fund

ITI Small Cap Fund recorded the highest three-year return among the three funds at 25.31%.

The fund had an AUM of around ₹3,454 crore and an expense ratio of 0.86%. ET's analysis assigned the fund a five-star rating.

As a small-cap fund, its portfolio is focused on smaller companies. Such funds can experience substantial fluctuations because small-cap stocks tend to be more sensitive to market cycles and liquidity conditions.

2. Bandhan Small Cap Fund

Bandhan Small Cap Fund delivered a reported 25.26% return over three years, placing it just behind ITI Small Cap Fund in the list.

Its AUM was around ₹31,103 crore, while the expense ratio was 0.61%. The fund received a five-star rating in the ET analysis.

The fund's larger asset base means it is considerably bigger than ITI Small Cap Fund, although AUM size by itself does not determine future performance.

3. UTI Healthcare Fund

UTI Healthcare Fund recorded a 25.04% three-year return.

Unlike the two small-cap funds, UTI Healthcare Fund is focused on the healthcare sector. It had an AUM of approximately ₹14,433 crore and an expense ratio of 1.33%. ET's analysis assigned it a four-star rating.

Because it is a sector-focused fund, its performance can be influenced significantly by developments in healthcare and pharmaceutical companies and by the broader performance of that sector.

Small-Cap vs Healthcare Fund: How Are They Different?

The three funds do not have the same investment approach.

ITI Small Cap Fund and Bandhan Small Cap Fund belong to the small-cap category and primarily provide exposure to smaller companies.

UTI Healthcare Fund, meanwhile, provides concentrated exposure to the healthcare sector.

This means that the historical 25%-plus performance figures cannot be compared as though the three funds have identical portfolios or risk characteristics.

Does a 25% Three-Year Return Mean the Fund Will Repeat It?

No.

Past returns show what a fund achieved during a particular period. They do not guarantee similar returns in the future.

This is particularly important for small-cap and sectoral funds, where returns can vary significantly depending on market conditions, valuations, economic cycles and sector performance.

Investors should therefore examine factors such as investment objective, portfolio composition, volatility, expense ratio, risk level and investment horizon before making an investment decision.

What Investors Should Check Before Investing

A three-year return figure is only one part of mutual-fund analysis. Investors may also consider:

• Investment category: Small-cap and sectoral funds carry different portfolio risks.

• Portfolio concentration: Sector funds can be more concentrated than diversified equity funds.

• Expense ratio: Higher costs can affect long-term returns.

• Risk and volatility: Historical returns should be considered alongside fluctuations.

• Investment horizon: Equity funds can experience significant short-term volatility.

• Consistency: Investors can examine performance across multiple market cycles rather than relying on one period.

• Personal financial goals: The suitability of a fund depends on the investor's own objectives and risk capacity.

Key Takeaways

• Three funds in the latest ET analysis delivered more than 25% returns over three years.

• ITI Small Cap Fund: 25.31%.

• Bandhan Small Cap Fund: 25.26%.

• UTI Healthcare Fund: 25.04%.

• Two funds are from the small-cap category.

• UTI Healthcare Fund is a sector-focused healthcare scheme.

• Historical performance does not guarantee future returns.

• Investors should assess risk, portfolio composition and suitability before investing.