List of worst equity mutual funds (Jan 2013 to Apr 2022)

Last Updated on April 30, 2022 at 3:33 pm

This is a list of the worst-performing equity mutual funds over every possible five, four, and three periods between 1st Jan 2013 (introduction date of direct plans) to April 8th 2022.

Some caveats before we begin:  (1) The definition of a “worst mutual fund” is as arbitrary as the definition of a “best mutual fund”. We hope that it is a reasonable definition, considering the high fees demanded by the MF industry.  This is one of the highest in the world, according to a Morningstar study. (2) We choose a representative category benchmark and compare the fund’s returns with the benchmark over the above-mentioned periods. The choice of the benchmark is also arbitrary but reasonably representative. (3) SEBI mutual fund categorization rules were fully in place by May-June 2018. Some funds (particularly those from smaller AMCs) may have changed significantly changed in style after that. An exhaustive filtration taking these changes into account is beyond the capabilities of this study.

(4) A fund labelled as “worst” means a careful, deeper investigation of its past performance is necessary, particularly if you invest in it or consider future investments in it. (5) Sectoral funds/ thematic funds are compared with Nifty 100 TRI. As a data analyst, this choice is incorrect. However, as an investor, it makes sense, and that is more important! We are not trying to submit a thesis here! If a thematic fund fails against a large cap index, it is an avoidable fund for most investors.

How a worst mutual fund is defined

Say there are 800 five year return periods possible; 1025 four year return periods; 1300 three year return periods; 1500 two year return periods. We shall define a fund as “worst” if it has beaten the benchmark for less than 50% of the 5Y and 4Y and 3Y return periods.

Let us take, for example, Principal Focused Multicap Fund- Direct Plan. We compare it with Nifty Largemidcap 250 TRI.

• No of rolling return entries (3 Years) 1472
• No of times the fund has outperformed the index (3 years) 552
• rolling return outperformance Consistency Score (3 years) 38%

• No of rolling return entries (4 Years) 1228
• No of times the fund has outperformed the index (4 years) 506
• rolling return outperformance Consistency Score (4 years) 41%

• No of rolling return entries (5 Years) 981
• No of times the fund has outperformed the index (5 years) 337
• rolling return outperformance Consistency Score (5 years) 34%

Using the April 2022 Equity Mutual Fund Screener, we filer out all funds with a rolling return outperformance consistency of less than 50% over five years and four years and three years. This will be our definition of a “worst fund”. We make no claim of superiority over this definition. We just feel this is reasonable while appreciating that not all readers will agree with the methodology used.

NOTE: Investors holding these funds need not exit them in a hurry. Please use this as a sign to dig deeper and re-evaluate these funds. A fund absent from this list does not mean it is a “good fund” or an outperformer!

The filtration process

A total of 378 equity mutual funds were studied from these categories and against these benchmarks.

We are left with 140 funds after applying the above filter.

Aggressive Hybrid Funds

Dividend Yield Funds

ELSS Funds

Focussed Funds

Large & Midcap Funds

Largecap funds

Midcap funds

Multicap funds

Sectoral or Thematic funds

Sectoral/ Thematic (international)

Small Cap Funds

Value funds

To reiterate: Investors holding these funds need not exit them in a hurry. Please use this as a sign to dig deeper and re-evaluate these funds. A fund absent from this list does not mean it is a “good fund” or an outperformer!