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

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).

How the list was prepared

  1. Compute fund return and index return over the last 1,2,3,4 and 5 years
  2. Compute fund and index standard deviation over the last 1,2,3,4 and 5 years
  3. Find fund return minus index return over each of these periods
  4. Fund fund standard deviation minus index standard deviation over each of these periods
  5. Plot (fund return minus index return) in the vertical axis versus (fund standard deviation minus index standard deviation) in the vertical axis
  6. 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

mutual fund risk vs reward map

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.

Relative Risk vs Reward of Mutual Funds: three years

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

Relative Risk vs Reward of Mutual Funds: five 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.

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

 

CategoryBenchmarkFund
EQ-ELSSNifty Largemidcap 250 TRIInvesco India Tax
EQ-L&MCNifty Largemidcap 250 TRIInvesco India  Opportunities Fund
EQ-MCNiftyMidcap150TRIAxis Midcap Fund
EQ-MCNiftyMidcap150TRIInvesco India Midcap Fund
EQ-MLCNifty Largemidcap 250 TRIKotak Standard Multicap Fund
EQ-MLCNifty Largemidcap 250 TRIMirae Asset India Equity Fund
EQ-S INFRANSE Infra TRIFranklin Build India Fund
EQ-S INFRANSE Infra TRILIC MF Infrastructure Fund
EQ-S INFRANSE Infra TRITaurus Infrastructure Fund
EQ-SCNiftySmallCap50-TRIAditya Birla Sun Life Small Cap Fund
EQ-SCNiftySmallCap50-TRIDSP BlackRock Small Cap Fund
EQ-SCNiftySmallCap50-TRIFranklin India Smaller Companies Fund
EQ-SCNiftySmallCap50-TRIHSBC Small Cap Equity Fund
EQ-SCNiftySmallCap50-TRIICICI Prudential Smallcap Fund
EQ-SCNiftySmallCap50-TRIKotak Small Cap
EQ-SCNiftySmallCap50-TRIReliance Small Cap Fund
EQ-SCNiftySmallCap50-TRISBI Small Cap Fund
EQ-SCNiftySmallCap50-TRISundaram 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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Updated: March 5, 2019 — 3:16 pm

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M. Pattabiraman

This article is authored by M. Pattabiraman. He is the co-author of two books: You can be rich too with goal based investing and Gamechanger. He is a patron and co-founder of "Fee-only India" an organisation to promote unbiased, commission-free investment advice “Pattu” as he is popularly known, publishes research, analysis and holistic money management advice at freefincal.com which serves more than one million readers a year. Frefincal.com has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners.

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  1. How does it differ from downside protection?

    Other than that the downside protection only looks at the instances of a negative return in the benchmark index?

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