Analyze Mutual Fund Risk vs Return for 10 Years!

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:

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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11 thoughts on “Analyze Mutual Fund Risk vs Return for 10 Years!

  1. Siva Prasad

    sir,
    while checking the same icici pru blue chip equity fund against benchmark BSE100, risk return score for 2Yrs. is nil also the UI of benchmark is shown a sudden drop on 12/30/2014. Please explain why.

    Reply
  2. Vandhiadevan

    As expected , another great magic tool to find the consistent performance of equity funds from Mr.Pattu.

    Hope this alone enough for all category selection of funds.

    Can i use this sheet for periodical review of my SIP fund list.

    Reply
    1. freefincal

      Thank you. Yes, you can use this for all equity categories except balanced funds and sector funds and also for periodical review. However, please focus on the XIRR of your fund and the net XIRR of your folio (see my post on "how to review a fund folio").

      Reply
  3. Dinesh Singh

    1. Something appears to be wrong - In the Results sheet, investment periods for fund are 03.05.15 to 08.02.16, 03.05.14 to 08.02.16, ... while for index these are 12.02.15 to (blank), 12.02.14 to (blank), ... . Shouldn't these be identical and 1 year, 2 years, ... approx?
    2. In Upside Downside Analysis Sheet, why Downside CAGR Fund is always positive & Downside CAGR Index is always negative? This has resulted in Downside Capture always negative. For the same reason, Capture Ratio is also always negative.
    3. In Ulcer Index sheet, Ulcer Scores for Duration 6 & 7 are different, but UI Fund & UI Benchmark are exactly same for both the durations.
    4. You are a critic of beta, standard deviation, alpha etc and had abandoned these for the sole metric of Capture Ratio but now you have again brought them back. Is there any particular reason for that?

    Reply
    1. freefincal

      1. Date missing. Corrected
      3. Ulcer index values repeated. Corrected. Thank you.

      2. Upside CAGR and downside Cagr of index will be +ve and -ve always by definition. Fund values can be anything. Capture ratio sign has to be understood in context.
      4. Yes I am a critic and have moved away from those. These metrics are for those who would still like to use them.

      Reply
  4. Dinesh Singh

    Even for a fund less than 8 years old, Ulcer Score, UI Fund and UI Benchmark values are given for all the 8 years. The analyzer should detect somehow non-availabilty of data for the full period and indicate that as #N/A or something similar for those periods just as it is doing in the Upside Downside Analysis Sheet.

    .You are downloading Index values from moneycontrol website which does not provide data for Nifty Free Float Midcap 100 which is a benchmark for many Mid and Small cap funds. Either provide for downloading of this and other indices like CNX 200 from other sites (where these may be available) or include them in the category of pre-loaded indices like TRI-ones with a caution to update them manually. Incidentally this caution is not appearing even with TRI indices as it was appearing in your earlier calculators.

    For inter-fund comparison, will it not be better to use a common category-appropriate instead of using different benchmarks used by different funds? What can be such category-appropriate indices for LC, MLC, MC, SC and TP?

    When can we expect an Analyzer for Balanced Funds? Perhaps the problem for such funds is the non-availability of CRISIL benchmark indices? Can you work around this problem with a 65:35 combination of suitable publicly available Equity and Debt indices?

    Regards,

    Reply
  5. shanjana

    Dear Sir,

    Can you Please tell me how to interpret Risk Reward Chart using the Standard Deviation and Mean. What is MEAN in mutual fund? How to interpret using MEAN and SD?

    Reply

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