18 mutual funds with better than index return & lower than index risk!

Last Updated on March 5, 2019

By M. Pattabiraman Follow @freefincal

Here are 18 mutual funds with better than index return & lower than index risk over the last 1,2,3,4 and 5 years! I have calculated this with trailing returns and trailing standard deviation (a measure of volatility) using the freefincal equity mutual fund consistency screener. This is an alternative way of short-listing mutual funds. However, it may not be as rigorous as this shortlist made with rolling returns and downside protection: List of Equity Mutual Funds with most consistent performance (Feb 2019).

Table of Contents

How the list was prepared

Compute fund return and index return over the last 1,2,3,4 and 5 years
Compute fund and index standard deviation over the last 1,2,3,4 and 5 years
Find fund return minus index return over each of these periods
Fund fund standard deviation minus index standard deviation over each of these periods
Plot (fund return minus index return) in the vertical axis versus (fund standard deviation minus index standard deviation) in the vertical axis
This will provide four sections as shown below and we shortlist funds that fall in the upper left quadrant (yellow text) to choose funds with lower than index risk and higher than index returns over 1,2,3,4 and 5 years

Relative Risk vs Reward of Mutual Funds: three years

We consider 268 equity mutual funds. To get a full list of the funds and the benchmarks used, consult the freefincal equity mutual fund consistency screener.

We shortlist funds within the white rectangle over 1,2,3,4 and 5 years.

Relative Risk vs Reward of Mutual Funds: five years

List of 18 mutual funds with better than index return & lower than index risk!

So these are funds that were always found in the upper left quadrant.Notice the prominent absence of large cap funds and thinly populated other categories! Only Small cap funds are well represented perhaps because it is easy to stay less volatile than the index and that alone can beat the index during downturns.

Category	Benchmark	Fund
EQ-ELSS	Nifty Largemidcap 250 TRI	Invesco India Tax
EQ-L&MC	Nifty Largemidcap 250 TRI	Invesco India Opportunities Fund
EQ-MC	NiftyMidcap150TRI	Axis Midcap Fund
EQ-MC	NiftyMidcap150TRI	Invesco India Midcap Fund
EQ-MLC	Nifty Largemidcap 250 TRI	Kotak Standard Multicap Fund
EQ-MLC	Nifty Largemidcap 250 TRI	Mirae Asset India Equity Fund
EQ-S INFRA	NSE Infra TRI	Franklin Build India Fund
EQ-S INFRA	NSE Infra TRI	LIC MF Infrastructure Fund
EQ-S INFRA	NSE Infra TRI	Taurus Infrastructure Fund
EQ-SC	NiftySmallCap50-TRI	Aditya Birla Sun Life Small Cap Fund
EQ-SC	NiftySmallCap50-TRI	DSP BlackRock Small Cap Fund
EQ-SC	NiftySmallCap50-TRI	Franklin India Smaller Companies Fund
EQ-SC	NiftySmallCap50-TRI	HSBC Small Cap Equity Fund
EQ-SC	NiftySmallCap50-TRI	ICICI Prudential Smallcap Fund
EQ-SC	NiftySmallCap50-TRI	Kotak Small Cap
EQ-SC	NiftySmallCap50-TRI	Reliance Small Cap Fund
EQ-SC	NiftySmallCap50-TRI	SBI Small Cap Fund
EQ-SC	NiftySmallCap50-TRI	Sundaram Small Cap Fund

How to use this information

This is yet another way to shortlist mutual funds – another blind man touching the elephant. They are certainly good funds. Are they consistently good funds? To answer this, I will find a way to including rolling returns and risk study into this. The shortlist should be used only if you understand how it was calculated and how it differs from downside protection. For the moment, the non-small cap funds in this list can look at more closely by readers. Let me know your thoughts on this method -which is well known by analysts, you can get this information for each fund at Morningstar India. From the next edition of the freefincal screener, the full data will be available each month.

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M. Pattabiraman(PhD) is the author and owner of freefincal.com. He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Follow @freefincal “Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)

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