Analyze Mutual Fund Risk vs Return for 10 Years!

Published: August 18, 2016 at 6:22 am

Last Updated on

Use this sheet to gauge the performance of equity mutual funds on a risk-adjusted basis for investment durations ranging from the past 1 year to the past 10 years. Version 6 now includes six nifty strategy indices (smart beta) for analysing mutual fund performance.

The Nifty strategic indices are tougher benchmarks for mutual funds to beat. Therefore, using these benchmarks would be a better way to separate the wheat from the chaff.  A couple of these indices were also studied in detail:

This version also incorporates the recently released downside protection calculator

This analyzer can be used by ALL retail investors. NO knowledge of risk and return analysis is required to use the sheet and understand the results!

How to use this analyzer

  1. Choose the fund category.
  2. List all funds in that category at Value Research Online.
  3. Spot the funds which have been in the top 10 in terms of returns over the past 3, 5 and 10 years (3,5 alone should also do).
  4. Create a shortlist based on the above criterion. About 5 funds, not more.
  5. Analyze the funds with this sheet and look for a consistent risk-return score and consistent downside protection and invest in one of them.
  6. This will take you about 30 minutes or so.

Features of the risk and return analyzer

For equity mutual funds, you can determine SIP and lump sum returns for investment duration up to 10 years.

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Evaluate performance taking into account the risk taken for the return achieved (13 metrics are computed. See the list here). A percentage score is assigned to the fund for each investment duration based on values of the 13 different risk/return metrics.

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Risk-return score for ICICI Top 100 vs BSE 500 TRI
  • Compare Fund versus benchmark. Indices available: A total of 53 Indices, including Nifty TRI, Sensex TRI, BSE 200 TRI, BSE 500 TRI,Nifty, CNX 100, CNX Mid Cap, CNX 500, Sensex, BSE Small Cap, Mid Cap, BSE 100,200, 50 etc.Indices available: A total of 47 Indices, including Nifty TRI, Sensex TRI, BSE 200 TRI, BSE 500 TRI,Nifty, CNX 100, CNX Mid Cap, CNX 500, Sensex, BSE Small Cap, Mid Cap, BSE 100,200, 50 etc.

TRI refers to total returns index. That is the index has been calculated with dividends reinvested.

The user needs to obtain them manually from the S&P website (updated up to 4th April 2016). Links for updating each index is provided in the sheet.

The TRI indices are stored in the sheet while other indices are downloaded from Moneycontrol.

The six strategic indices are:

NV20 – 20 value stock from within Nifty.
NQ30 – 30 quality stocks from NSE listing.
Alpha50 – 50 alpha generators from top 300 NSE stocks (market cap)
NDivOpp – Top 50 dividend yield stocks from top 300 NSE stocks (market cap)
NLV50 – 50 least volatile stocks from top 300 NSE stocks (market cap)
NGS15 – Top 15 growth stocks from top 50% market cap of all sectors with PB and PE greater than the Nifty.
The strategy indices also need to updated from the NSE site (updated currently up to June 30th 2016).

Benchmark recommendations:

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Large Cap: Nifty Value 20 (NV20) and NIfty TRI

Mid-cap: Nifty Alpha 50 (Alpha50) and BSE 200 TRI and Nifty Mid-cap

Multi-cap: Nifty Next 50 (Jr), Nifty Low Volatility 50 (NLV50), Quality30 (NQ30) or BSE 500 TRI.

Div yield funds: Nifty Div Opp 50 (NDivOpp)

Small cap: BSE Small cap

  • Compare Fund and benchmark performance wrt a risk–free rate that you choose for each investment duration
  • Compare Fund and benchmark performance wrt a minimum acceptable rate that you choose for each investment duration
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Upside and downside capture

Read more: Understanding Upside and Downside Capture ratios

New feature: Upside and downside cagr

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Upside CAGR is the annualized returns from monthly gains and downside CAGR, the annualized CAGR from monthly losses.

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Ulcer Index evaluation for up to 8 years

Download Version 6.0 of the mutual fund risk and return analyzer (Aug 18th  2016)

Download Version 5.0 of the mutual fund risk and return analyzer (May 5th 2016)

Download Version 4.0 of the mutual fund risk and return analyzer (Jun 18th 2015)

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About the Author Pattabiraman editor freefincalM. 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 topics of money management. 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 on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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