Use this screener file to hunt for equity funds that have consistently outperformed category benchmarks with good downside protection and/or upside performance. This screener is meant for DIY investors who hopefully would appreciate these unique metrics. The “PlumbLine” is a set of handpicked mutual funds meant for the new investor to quickly get started when they use the Freefincal Robo Advisory Software Template.
Btw: Step 2 of ₹e-Assemble (laying the foundation for wealth) is out now. Have a look in case you missed it in the weekend
Out of the 416 equity funds listed at Value Research, 299 funds are at least 3Y old with consistency data listed. About 33 funds could not be calculated perhaps due to faults in the AMFU NAV history or incorrect fund code (will check this). And 83 funds are less than 3Y old and not part of this study.
When to use this mutual fund screener
I recommend using this file only when you are on the lookout for a new fund after completing the following steps:
Define need and duration —-> Decide asset allocation (use this tool) —-> Decide product category (use this guideline for mutual funds) —-> Then use this screener for equity funds.
Since the debt mutual fund space is constantly shifting and a qualitative search is necessary, I believe it is dangerous to build a debt mutual fund screener and therefore will not.
If you open the screener file, you see column headings such as this.
The entries seen with “3 years” will again be repeated for “5 years” and “7 years” as shown in the second panel.
Category Benchmarks Used
| Category | Category Code | Benchmark |
| Banking | EQ-BANK | BSEBankex-TRI |
| FMCG | EQ-CG | BSEfmcg-TRI |
| Infrastructure | EQ-INFRA | BSEInfra-TRI |
| International | EQ-INTL | Nifty Next 50 TRI |
| IT | EQ-IT | BSEIT-TRI |
| Large cap | EQ-LC | BSELargeCap-TRI |
| Mid-cap | EQ-MC | Nifty Next 50 TRI |
| Multi-cap | EQ-MLC | Nifty Next 50 TRI |
| Others | EQ-OTH | Nifty Next 50 TRI |
| Pharma | EQ-PH | BSEhealthcare-TRI |
| Small Cap | EQ-SC | Nifty Next 50 TRI |
| ELSS | EQ-TP | Nifty Next 50 TRI |
| Balanced | Balanced | BSE Balanced Index |
The categories are the same as that used by Value Research.
BSE Balanced index use to benchmark equity-oriented balanced fund is one of my own making: A new & accessible benchmark for balanced mutual funds
As for Nifty Next 50, the reason why it is used extensively is due to its fantastic track record in beating actively managed funds (in terms of returns, not risk management): Nifty Next 50: The Benchmark Index That No Mutual Fund Would Touch?!
Other benchmark choices are fairly straightforward.
Reward measure: Rolling returns outperformance consistency
Rolling returns are a simple way to estimate how consistency a fund has outperformed a benchmark. Take the case of Quantum Long Term Equity (fund in the graph below) and BSE Large Cap (index in the graph below). Bet 31st Aug 2008 and 9th Sep 2017, there are 991, 7 year durations. If the return for each of these durations is plotted for the fund and index together, we will get a graph like this.
The corresponding entries in the screener sheet would be as below (this is an example):
Notice that out the 991 fund returns, all of them are higher than the chosen index.
Thus the rolling return outperformance consistency over 7 years =
(no of times the fund has outperformed the index)/(total no of returns)
= 991/991 = 100%.
Naturally, higher the rolling return outperformance consistency, the better.
Reward and Risk measure: Capture Ratio Consistency Score
The upside capture is a measure of excess gains when compared with the benchmark. For example, an upside capture of 110% over 3 years implies, that the fund has captured 10% more than the benchmark when the benchmark monthly returns were positive. Higher the upside capture, the better.
The downside capture is a measure of loss protection. For example, a downside capture of 80% over 3 years implies that the fund has only captured 80% of the benchmark losses when the benchmark monthly returns were negative. Lower the downside capture, the better.
Please read this for more details: An introduction to Downside and Upside Capture Ratios.
The screener calculates upside capture and downside capture on a rolling basis over 3Y, 5Y and 7Y periods and calculates a consistency score.
upside capture consistency = no of times upside capture was > 100%/(total no of upside capture points)
So higher the consistency, more aggressive is the fund in outperforming the benchmark during up-market months.
downside capture consistency = no of times downside capture < 100%/(total no of downside capture points)
So higher the downside capture consistency, better is the fund in protecting investor money during down market months.
Many readers have got confused about this and I wish to clarify again:
All consistency measures (whether rolling return; upside or downside), higher the value the better. This is the only metric that you will see on the sheet.
Now have a look at the capture ratios for Quantum Long Term Equity
The upside consistency is 0%. This means that whenever BSE large cap gave positive monthly returns, the funds have never (over the 7Y period considered) been able been able to beat the index. This on its own, appears bad. However, when the index fell over a month, the fund fell less about 92.6% of the monthly returns in the 7-year window. That is a terrific record. This is why the fund has been able to beat the index consistently.
For some funds, a high downside capture consistency will lead to better returns and for some funds, a high upside capture consistency will lead to better returns. The screener can help distinguish the two types of performers.
Using the screener
You can use Excel data filter features to choose a particular fund category
Or, you can set the rolling consistency over 3Y (and/or) 5Y (and /or) 7Y to be above 80% or 75%
This should result in a nice small set to work with. You can also do the same kind of filtering to the capture consistencies and choose a fund.
This video does not include the rolling upside, downside data, but the spirit is the same.
I would recommend choosing a fund with a good rolling return outperformance consistency combined with a good downside protection outperformance consistency.
In other words, choose funds that beat the index by reducing the amount by which it falls during market lows rather the funds that beat the index when the index is moving up. This way, we can sleep a lot more peacefully.
Download the Freefincal Monthly Mutual Fund Screener (November 2017): Risk vs Reward Consistency
You Can Be Rich Too with Goal-Based Investing, my first book is now available at a 35% discount for Rs. 258. It comes with nine online calculators. Get it now. Order the Hindi version via this link
Gamechanger, my second book is now only Rs 149 (25% off). Get it or gift it to a young earner
The ultimate guide to travel by Pranav Surya is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)
Use this form to ask Questions or reg. the robo template ONLY (For comments/opinions, use the form at the bottom)
And I will respond to them in the next few days. I welcome tough questions. Please do not ask for investment advice. Before asking, please search the site if the issue has already been discussed. Thank you. PLEASE DO NOT POST COMMENTS WITH THIS FORM it is for questions only.
[contact-form][contact-field label=”Name” type=”name” required=”1″][contact-field label=”Email” type=”email” required=”1″][contact-field label=”Ask your question (Got an opinion or comment, use comment box at the bottom of the page. DO NOT post them here)” type=”textarea” required=”1″][/contact-form]
We now publish both equity fund and debt fund (+ hybrid fund) screeners each month!
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video! ⇐ More than 415 investors and advisors use this!
Unlock the secrets of successful financial advisors and entrepreneurs with our new course!
My 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 for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Join our courses in exclusive Facebook Groups!
- 550+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). 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 how to achieve by showcasing your skills and building a community that trusts you and pays you!
- Goal-based portfolio management! Join 2220+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content) in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author
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. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman 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 money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] comAbout freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only 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, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.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 analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, 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 199 (instant download)Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)