The best funds to invest in

What emerges clearly is that it's practically impossible to time the market. What is possible is spending time in the market. So, ignore market levels, keep investing regularly and stay for the long-term.

This way, the market will definitely work for you.

So which funds must you pick for your Systematic Investment Plan (investment plan that allows you to invest small amounts in a mutual fund every month)?

In 2005, Magnum Emerging Businesses was the best diversified equity fund in terms of returns with 80.21%. Even the lousiest -- LICMF Equity -- had a reason to feel happy with 23.32%.

Not a single diversified equity fund lost a penny in the last three calendar years. In fact, even the worst performer returned over 37% per annum during this period.

Here are the best players.

- Net Asset Values (price of a unit of a fund) and returns are computed as on March 6, 2006.
- All portfolio data as on January 31, 2006.
- Entry and exit loads are a percentage fee you pay on the amount you invest and withdraw.

Franklin India Prima

Entry load: 2.25%
Exit load: Nil
Launch: November 1993
NAV: 187
Top-most invested sectors: Healthcare, automobiles

The fund's ability to generate gravity-defying returns is well proven now. The fund's consistent record of generating huge returns year-after-year is good enough to convince investors to invest in it.

In 2001 and 2003, it was the hottest fund. While other diversified equity funds have given an average three-year annualised return of 64.11%, this one has given a return of 84.95%. It's five year returns are 52.94% as against the average of 33.79%.

However, where one-year returns are concerned, it has given average returns of 58%.

But these gains come with a higher risk. While Prima has everything that one looks for in a quality fund, still, you have to be mentally strong and ready to stay invested for the long-term. Mid-caps are always risky and this fund is no exception.

Entry load: 2.25%
Exit load: Nil
Launch: January 1994
NAV: 56.965
Top-most invested sectors: Metals & metal products, technology

This is an unusual mid-cap fund. The fund invests mainly in mid-cap and small-cap stocks. Yet, it offers a rare combination of below average risk and above average returns.

While the average returns of its peers was 33.79% (five year returns) and 64.11% (three year returns), this fund delivered 36.8% and 74.72% respectively. Its one year return was 53.16% as against 58.11% of its peers.

Overall, the fund looks good for an investor seeking to benefit from mid-cap stocks but not willing to take too much risk.

Entry load: 2.25%
Exit load: Nil
Launch: July 1999
NAV: 29.8
Top-most invested sectors: Automobile, construction

This fund picks stocks that are currently undervalued but has the potential for price appreciation. In 2004, it pulled off an exceptional return of 64.49% to emerge as the second hottest diversified equity fund. Last year, it was the third best fund.

When fund manager Sandip Sabharwal responsible for the fund's management quit last year, Sanjay Sinha took over. He made an effort to tone down the aggressive nature of the fund. Barring four stocks, he has kept the rest of the stocks that Sabharwar invested in intact. He had also added a few more.

Time will tell if Magnum Contra will continue to impress.

Entry load: 2.25%
Exit load: Nil
Launch: October 1995
NAV: 213.6
Top-most invested sectors: Basic/ engineering and FMCG

The fund manager has an uncanny knack of picking winners among untested stocks. In some, he buys and holds on to them. In others, he gets in and out quickly. The fund is also known for making smart sector moves.

It has beaten other funds with a return of 91.7% (three year returns) and 55.88% (five year returns) when its peers delivered returns of just 64.11% and 33.79% respectively.

Sundaram Select Midcap

Entry load: 2.25%
Exit load: Nil
Launch: July 2002
NAV: 68.5798
Top-most invested sectors: Construction / FMCG

This hidden gem deserves attention. In its three-and-a-half years of existence, it has used mid-cap and small-cap stocks extremely well to generate enormous wealth for its investors. It was launched at a time when the prices of mid-cap stock were about to zoom.

The fund does not believe in the buy-and-hold strategy and stocks keep coming into the portfolio and going out.

The fund has displayed an ability to think against the herd. For instance, while other funds invest in stocks of technology, financial services, energy and healthcare, this fund has shown a keen interest in the chemical and construction industry.

It has given a return of 77.15% (one year return) and 85.29% (three year return) as against the average of 58.11% and 64.11% of other such funds respectively.