Last Updated on December 29, 2021 at 12:08 pm
Here are lessons from the best and worst performing mutual funds of 2018. None of the funds mentioned are to be considered for investment. Observing annual returns can make us understand risk better and sometimes introduce us to a new investment strategy adopted by mutual funds. In this 2018 return means return between Jan 1st 2018 to Dec 31st 2018. Last one year return means return between Jan 14th 2018 to Jan 14th 2019 or the trailing return as on date of publication
Index returns in 2018 (dividends included)
- Nifty and Sensex ~ 4-5%
- Nifty 100 2.6%
- Nifty 100 Low Volatility 7.3%
- Nifty next 50 -7.8%
- Nifty 50 Equal Weight -4.6%
- Nifty 100 Equal Weight -8.4%
- NIFTY 50 Value 20 TRI 10.4%
Last 1Y Index returns (dividends included)
- NIfty and Sensex 2%
- Nifty 100 -0.3%
- Nifty 100 Low Volatility 3.4%
- Nifty next 50 -12%
- Nifty 50 Equal Weight -8%
- Nifty 100 Equal Weight -12.3%
- NIFTY 50 Value 20 TRI 6%
Observations
- Are thinking, “NIFTY 50 Value 20 or Nifty 100 Low Volatility seem like a good investment”? Stop right there! First, these are available as only ETFs with only a few crores of assets. So if you are interested, pick individual stocks. See for example: Seven months of lazy stock investing! Dec 2018 Update
- Look how different Nifty next 50 returns are from Nifty 50. I have said it once and I will say it again Warning! Nifty Next 50 is NOT a large cap index! Just because SEBI says so, does not make it one!! The risk is different and so the categorization should be different
- Noticed the importance and difference between market capitalization based weighing and equal weighting. Equal weighting = higher risk.
- Sundaram Smart NIFTY 100 Equal WeightFund – Direct Plan has returned over 1% above its index. This is a worrying sign! Readers may recall that Sundaram and Principal I removed Nifty 100 from Handpicked Mutual Funds January 2019 (PlumbLine) I am glad I did that. This begs the question is it hard to manage a 100 stock equal weight index? Possibly due to liquidity issues? More on this later.
Large cap funds
- Axis Bluechip emerged as the top performer in 2018 comfortably beating the NIfty 50.
- The worst actively managed fund is Taurus Large Cap with -8%
Large and Mid Cap Funds
- The Nifty 200 TRI move up 0.3% in 2018 and fell -2.6% in the last year
- Only Sundaram Large and Midcap and Invesco India Growth Opportunities fared better in the last year (trailing return).
- There is a huge spread in last year returns: -1.44% to -19.44%. Another reminder that binning funds into the same category does not make them the same or even similar! Just because it is convenient to so and apply a star rating, does not make it right.
Multicap funds
- I do not understand how a multicap fund differs from a large and mid cap fund but happy to see seven funds did better than Nifty 200 TRI in past year (trailing)
Midcap funds
- NIFTY Midcap 100 TRI returns -14.5% in 2018 and -18% in the last year. Axis mid cap is the only fund in this category to have move up in 2018 by 4.5% and 1.5% (trailing) even though it still holds about 78% of midcaps. Not bad at all.
- SBI Magnum MId cap is the worst performer with -17% in 2018 a clean 4% higher fall than Nifty Midcap 150 TRI
Small cap funds
- Axis small cap beat NIFTY Small cap 100 TRI by a huge margin! The small caps index fell 31.8% in the past year but the axis fund fell only 9.4%. It does not hold any large caps.Looking at its NAV growth, there is a distinct change in correlation with index from Jan 2018!
- Sundaram Small cap is the worst performer with -30% trailing a touch more than its benchmark NIFTY Small cap 250 TRI
Aggressive Hybrid funds
- CRISIL Hybrid 35+65 Aggressive the typical benchmark for this category returned 3% in 2018 and only Sundaram Hybrid Equity could top that. Makes you wonder if we should have index funds in this category.However the associated risk is unknown (as we do not have public data)
Dynamic asset allocation funds (Balanced Advantage)
- CRISIL Hybrid 50+50 Balanced Index returned 3.6% in 2018. This however involves no tactical asset allocation (TAA)
- NIFTY 50 & Short Duration Debt – Dynamic P/B Index which uses PB based TAA returned 7.2% in 2018
- NIFTY 50 & Short Duration Debt – Dynamic P/E Index which uses PE based TAA returned 6.2% in 2018 (I shall discuss these TAA indices in detail soon)
- SBI Dynamic Asset Allocation Fund – Direct Plan returns 8.4% in 2018. This employes a three component momentum based TAA strategy. However it can swing from equity to debt fund with respect to taxation and also literally. This is best in this category.
- Franklin India Dynamic PE Ratio Fund ofFunds – Direct Plan managed 5.3% in 2018 and is a distant second.
The allocation to equity is guided by a proprietary ‘asset-allocation’ model which combines Equity Market Price to Earning (PE) along with Equity Risk Premium to arrive at a precise allocation to equity
well whatever that means, it has not worked in 2018 (relatively speaking). Aditya Birla Sun Life Asset Allocator Multi-Manager FoF Scheme and BOI AXA Equity Debt Rebalancer Fund also suffered losses in 2018.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Gold
- All gold funds beat equity funds this year with 6-8% returns
Arbitrage
- Among the star rated funds (that is funds that have not changed much due to SEBI rules), the spread is reasonable 5-7%.
- Will 2019 be the year when an arbitrage fund see a credit rating crisis? Could be as the SEB rules only require 65% arbitrage in the portfolio.
Debt
- The year saw huge falls in many debt funds due to the IL&FS Bond Downgrade. Motilal Oswal Ultra Short term fund fell 7.6%
- CCIl All Sovereign bond index that had an avg duration of 7-8 years in 2018 returned 8.25% and (only) five gilt funds beat that.
- Amusingly Franklin India Government Securities Fund got the last place with 4.2% returns in 2018. Debt space has become complex after the SEBI categorization rules.So I will not go any further.
Special mentions
- HSBC Infrastructure fund fell 38.6% (you don’t need a 2008 to experience such falls!!)
- Only IT funds (due to a weak rupee?) and few banking funds had gains. Tata digital grew by 21% (1Y trailing). All other sectors fell, with infra the hardest hit.
- HSBC Brazil fund grew 13.4% last year (trailing)
- Edelweiss Greater China offshore fund fell 17.6% (1Y, trailing)
Summary
Axis MF has impressed in equity. The “large cap” indices continue to teach us new lessons about risk and portfolio weights. Debt fund investors who chased returns lost big. The momentum strategy of SBI MF demands a close look, while the time-tested PE strategy of Franklin worked yet again.Most import of all, many new investors saw negative returns for the first time. How did they feel? We shall find out in an upcoming article. Happy Pongal.
New videos on freefincal @ YouTube
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)