Mutual funds are one of the most frequently used instruments of investment in India – ideal for large sections of the population who lack a combination of time to conduct adequate market research, the inclination to do so, and significant investment caches – but wish to turn a profit. With India possessing one of the world's highest savings rates, there is a need in the market to look beyond traditional instruments of investments such as gold and fixed deposits. However, while mutual funds offer a range of benefits to investors, allowing them to capitalize on market trends and gains, they come with their shortcomings that must be carefully assessed before any investment. Over the course of this blog, we shall look at the best-performing mutual fund schemes of 2021 and explore whether investing in them in 2022 is the right decision for you or not.

• Best performing Mutual Funds of 2021

2021 proved to be an excellent year for mutual fund investors, with equities received jumping significantly by December 2021, last witnessed way back in April 2018. Let us look at some of the top performers in 2021:

Scheme	% of Return
Quant Small Cap Fund	88.05
Quant Infrastructure Fund	83.22
L&T Emerging Businesses Fund	77.41
ICICI Pru Technology Fund	75.74
Tata Digital India Fund	74.44
Nippon India Small Cap Fund	74.34
Kotak Small Cap Fund	70.94
BOI AXA Small Cap Fund	70.83
Canara Robeco Small Cap Fund	70.81
Tata Small Cap Fund	70.52

2021 proved to be the year of Small-Cap and Thematic Funds. However, before assuming that these are the very same schemes you must invest in in 2022, let us look in detail at factors that can determine your investment.

• Should you invest in them in 2022?

Change is the only constant in life, and that saying holds even for the investment market in India. The list of top-performing funds changes year on year, with history showing that no one fund has succeeded in finding a place in the top-performing fund's list over consecutive years. Moreover, with the market being dynamic in nature, no one theme yields a constantly high rate of returns. 

Thus, before investing in any mutual fund scheme in 2022, an annual compilation of the best performers of the year-gone-by is not the safest bet. Instead, it would be best if you considered a range of factors – long-term performers with consistent returns, avoiding thematic funds and sticking to Large-Cap, Mid-Cap, and Flexi Cap funds, and thorough research.

• Conclusion

We at Motilal Oswal suggest against such brash investment decisions unless you possess the requisite knowledge of such funds. So, check-in with us for the best mutual funds to invest in for the long term.

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How to Analyse Mutual Funds for Big Returns | Things to Know Before Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account