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As the financial year draws to a close, entrepreneurs, professionals and MSME owners often look for efficient ways to optimise their taxes, grow wealth, and rebalance portfolios. Year-end is one of the best periods to evaluate and purchase mutual funds — not only for long-term wealth creation but also for tax-planning and cash-flow optimisation.
This SMEStreet exclusive guide outlines the top benefits, key selection parameters, and expected RoI trends to help investors make informed decisions.
Why Year-End Is a Smart Time to Invest in Mutual Funds
1. Tax Planning Before 31st March
For individuals and business owners under the old tax regime, ELSS funds offer tax deductions of up to ₹1.5 lakh under Section 80C. Buying earlier rather than last-minute helps you stagger investments and avoid market timing mistakes.
2. Portfolio Rebalancing Opportunity
Year-end is ideal for:
Reviewing asset allocation
Booking profits from equity
Rebalancing between equity, debt & hybrid funds
This helps maintain risk-reward balance for the upcoming financial year.
3. Bonus Units, Dividends & NAV Adjustments
Many funds align dividends or schemes updates around year-end, giving investors opportunities to enter at stable NAV levels before new allocations begin.
4. Market Volatility Advantage
Historically, markets experience volatility around January–March due to:
Budget expectations
FII outflows/inflows
Tax-harvesting
This creates opportunities for strategic SIP or staggered lumpsum entries.
Top Parameters to Select the Best Mutual Funds
1. Fund Category Based on Your Goal
| Goal | Best Fund Category |
|---|---|
| Tax saving | ELSS |
| 3–5 year growth | Large & Flexi-Cap |
| High-growth aggressive | Small-cap & Mid-cap |
| Steady income | Short-Duration or Corporate Bond Funds |
| Balanced growth | Hybrid Aggressive Funds |
2. Track Record of the Fund Manager
Choose funds that have delivered consistent performance for 5–10 years, not just during bull cycles.
3. Expense Ratio
Lower expense ratios indicate more efficient fund penetration and higher potential returns for long-term investors.
4. Risk Metrics
Review:
Standard deviation
Sharpe Ratio
Sortino Ratio
Portfolio turnover
Funds with balanced risk metrics outperform over market cycles.
5. AUM Stability
Avoid extremely massive AUMs in small-cap/mid-cap categories and too tiny AUMs in niche funds.
Expected ROI Trends for 2025–26
Based on market conditions, economic growth forecasts, and historical performance:
Large-cap funds: 10–12% CAGR
Flexi-cap/multi-cap funds: 12–14% CAGR
Mid-cap funds: 13–17% CAGR
Small-cap funds: 15–20% CAGR (higher risk)
Debt funds: 6–7.5% CAGR
Hybrid funds: 9–12% CAGR
These are indicative, based on past data and market outlook.
End Note
Year-end mutual fund investing is a strategic opportunity for MSMEs, entrepreneurs and salaried professionals to align tax planning, manage liquidity and position for long-term growth. With India’s strong economic cycle and rising corporate earnings, 2025–26 is expected to be a favourable time for steady SIP and disciplined investing.