There are about six equity mutual funds schemes that have offered over 20 per cent return in 2022 so far. These six schemes altogether hold about 125 stocks in their portfolios. Surprisingly, there is not one stock that is held by all six schemes but State Bank of India is the one held by five out of these six schemes. We further examine how these stocks have performed in this calendar year so far. It shows that six stocks from the list have surged over 100% in less than nine months of 2022. (Data Source: ACE MF).
Interestingly, among the top-performing schemes, ICICI Pru Infrastructure Fund(G) held four of these multibagger stocks.
Renowned investor Peter Lynch coined the term 'multibagger' in order to refer to equity shares of a company which were capable of creating returns several times higher than their associated cost of acquisition.
Here are 5 mutual fund schemes with highest 3-year returns along with their expense ratios: Quant Small Cap Fund(G) tops the chart with over 39% returns followed by Quant Mid Cap Fund(G), Nippon India Small Cap Fund(G), Quant Flexi Cap Fund(G) and Motilal Oswal Midcap Fund-Reg(G) in the same pecking order.
(You must convert the rate of return to the monthly figure through dividing by 12). You also have n = 10 years or 120 months. FV = Rs 1,84,170. So, the future value of a SIP investment of Rs 1,000 per month for 10 years at an estimated rate of return of 8% is Rs 1,84,170.
As multibagger stocks generate multifold returns, higher risks come with higher returns. So, if you are planning to invest in multibagger stocks, you need to be cautious about the risk associated with these stocks too. The primary risk associated with these stocks is value traps.
A few examples of multi-bagger stocks include companies like Eicher Motors, MRF Ltd, Asian Paints, Pidilite Industries, and Bajaj Finance, which have achieved phenomenal growth over the years. All these stocks have given significant returns over the years and hence make it to the list of Multi-Bagger stocks.
Multibagger stocks are equity shares of a company that generate returns multiple times higher than its associated cost of acquisition. These stocks were first invented by Peter Lynch, published in his book 'One Up on Wall Street'.
More often than not, mutual funds do not provide the same type of multibagger returns that stocks can give. If you are a seasoned investor with extensive knowledge of the market, by all means, go ahead and invest in the stocks you believe in.
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