While investing in mutual funds, it is important to assess the returns and risk of the fund, but at the same time the expense ratio should not be ignored. This is the fee that the fund house charges for investment management. A high expense ratio has a direct impact on your returns. In such a situation, if a fund is performing well at a low fee, nothing can be better than this.
We have identified 10 equity mutual funds that are 5-star rated by Value Research and have low expense ratios. Additionally, these funds have performed steadily over the years and have given good returns to investors. All these funds have their market journeys ranging from 5 years to 12.5 years.
The biggest feature of these funds is that they come from different categories — small-cap, large-cap, large & midcap, flexi-cap and ELSS (tax saver). This means that investors have complete freedom to choose the right option based on their risk profile, investment horizon and goals. ELSS helps in saving tax, while flexi-cap and small-cap funds have the potential to deliver growth in the long term.
Also read: Best international mutual funds in 2025: Top 5 schemes with 1-year returns up to 74 pc
Here are top 10 best-rated equity mutual funds with the lowest expense ratio.
1. Bandhan Small Cap Fund – Direct Plan
Expense ratio: 0.39%
The fund – launched in February 2020 – has given a 17.35% return in 1 year, 37.96% CAGR in 3 years, and 38.99% in 5 years.
2. Invesco India Smallcap Fund – Direct Plan
Expense ratio: 0.44%
The small-cap scheme, started in October 2018, has delivered a 12.89% return in 1 year, 33.82% CAGR in 3 years and 36.55% return in 5 years.
3. Bandhan Large & Mid Cap Fund – Direct Plan
Expense ratio: 0.57%
Bandhan Large & Mid Cap Fund – Direct Plan, started in January 2013, has given investors annualised returns of 8.94% in 1 year, 31.47% CAGR in 3 years, and 30.66% in 5 years.
4. Nippon India Consumption Fund – Direct Plan
Expense ratio: 0.57%
The fund’s 1-year return has been subdued at 1.62%. However, it has delivered stellar returns in the long term, a 24.21% annualised yield in 3 years and a 26.97% CAGR in 5 years. The fund was launched in January 2013.
5. HDFC Focused 30 Fund – Direct Plan
Expense ratio: 0.61%
The scheme has delivered an 11.98% return in 1 year, 29.07% CAGR in 3 years, and 31.94% in 5 years. The fund was launched in January 2013.
6. Parag Parikh ELSS Tax Saver Fund – Direct Plan
Expense ratio: 0.62%
Parag Parikh ELSS Tax Saver Fund – Direct Plan, launched in July 2019, has given investors a 14.91% return in 1 year, 24.50% CAGR in 3 years, and 27.95% return in 5 years.
7. SBI Contra Fund – Direct Plan
Expense ratio: 0.62%
The fund’s 1-year performance has been lacklustre at 3.69%. The scheme has performed well over the long term with returns of 27.54% CAGR in 3 years and 35.46% in 5 years. The fund was launched in January 2013.
8. Parag Parikh Flexi Cap Fund – Direct Plan
Expense ratio: 0.63%
Parag Parikh Flexi Cap Fund – Direct Plan’s returns have been stellar over both the short and long terms. The fund has given a 12.97% return in 1 year, 25.60% CAGR in 3 years, and 27.59% return in 5 years. The fund began its journey in May 2013.
9. Motilal Oswal Large and Midcap Fund – Direct Plan
Expense ratio: 0.66%
The fund’s 1-year return stood at 15.73%. Its 3-year and 5-year returns have been even better at 36.41% and 32.70%, respectively, on an annualised basis. The fund was started in October 2019.
10. Nippon India Large Cap Fund – Direct Plan
Expense ratio: 0.67%
Nippon India Large Cap Fund – Direct Plan, launched in January 2013, has delivered a 6.82% return in the last 1 year. However, the fund’s 3-year and 5-year performances have been better, with 26.79% and 28.33% CAGR, respectively.
(Data: Value Research)
Low cost + good performance = smart investing
The combination of low expense ratio and good returns can be beneficial for any investor. These funds have delivered competitive returns in the last 1 year, 3 years and 5 years. Their track record shows that these funds are able to maintain consistency despite market fluctuations.
Keep in mind: Past returns are not a guarantee of future
However, it should always be kept in mind that there is no guarantee that past returns will be repeated in the future. Market conditions keep changing, so before investing in any fund, assess your risk profile, investment period and goals.
Conclusion: Choose wisely, invest with confidence
If you are planning wealth creation through equity mutual funds in 2025, then these 10 top-rated, low-expense funds can prove to be a strong foundation for your portfolio. By investing in them, you can not only reduce the cost of investment but also move towards a better and balanced return.
