The method adopted is based on this report: A simple way to measure mutual fund performance consistency.
* representative of a category.
** Rolling returns for some funds could not be calculated. The list of all such funds can be found in the screener file.
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Mutual Fund Performance Consistency Score
Rolling returns are a simple way to estimate how consistency a fund has outperformed a benchmark. Three-year rolling returns have been considered. For example, suppose 1000 such 3Y returns are available for the fund and 800 such returns for the benchmark. Here is an example:
We ask how many times has the fund got a better 3Y return than the benchmark. Suppose 500 such fund returns are higher, the performance consistency score is computed as
= 500/800 = 63%.
The minimum of (1000 and 800) = 800 is used in the denominator.
Higher the consistency score, the better the fund has performed with respect to the benchmark.
The simplest way to understand the efficacy of this method is to consider the performance score of well-known poor performers - certain funds from JM Mutual or LIC Nomura - and check their consistency score. It would be quite low.
I think any score about 60% is reasonable and above 70% quite good. Less than 50% for the 3Y rolling returns is probably a warning sign to monitor closely.
An excel sheet in which funds can be screened for consistency across categories or per category is attached below. The same benchmarks as the November 2016: List of Equity Mutual Fund Returns and Up/Down Capture Ratios are used.
Using the Mutual Fund Screener
The screener sheet in the file contains all entries. To display only one or two categories, the user can click on the grey square (red oval below), then uncheck "select all: and then select the categories required. The screener is easy to use with Excel's data filters.
If the no of rolling return entries is less than 500 then the fund is quite young to be judged. Higher the entries, the better.
Select a cut off for the consistency score: Above 60% or above 70% as mentioned above and check the funds which have done well. You can use this in combination with the Sep 2016 returns listing.
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- Simple and powerful This book empowers the reader with the concepts in easy to understand & simple form. Those who have been reading blogs of both authors would know that they are not only good with finance domain but also have a knack of simplifying the methods of investing for their readers. This book by them is a gem of financial knowledge for people who are starting to invest or want to get better at it. The presentation and the thought process with calculators is extremely powerful.The book should be read & calculators used simultaneously to understand the concepts well. The calculators when used with real inputs will show you where you are & where you need to reach for each of your goals. Don't ignore these numbers.Learnings from Chapters 7 to 11 will help you avoid going off path & saving your money from financially hazardous products. With discipline & right approach suggested here you wouldn't need a financial advisor to build wealth.
- This is perfect book on personal finance. Very nicely explained about taxation about debt mutual fund. Topics like early investing and asset allocation are very well explained. - Mahesh Deshmukh
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