This special quantitive analysis is to help those who want to make mutual fund investments for long term now and then forget about it for a very long term say 5-10 years ahead.
Currently, this is not my style of MF investment as I am comfortable to limit the performance upto 1 yr only as I am still building my portfolio from scratch for the last one year. However, I like to honor the request and come up with best possible answer quantitatively. I am providing this answer in two ways:
Option 1. Top 50 funds based on top average return across 1Yr and 3 Yr timelines.
Option 2: Further restriction on Option 1, which is to select only the Top ones based on the average across 1 Yr, 3 Yr and 5 Yr returns.
Let me give the answers per this quantitative analysis first and then discuss the limitations of this analysis.
Option 1: Top 50 funds based on top average return across 1Yr and 3 Yr timelines.
1.1. The picture above provides the Top 50 mutual funds with best average return across 1 Yr and 3 Yr. Since the Indian equity market has shown a different character trend in the last 3 years, assumption here is that one can look into only the combination of 1 Yr and 3 Yr time horizons.
1.2. One can simply say that all these top 50 funds are worthy to be considered for investment ahead as the lowest combined average across 1Yr and 3 Yr is 42.92% which is quite impressive. However, the choices needed are a few, one could only focus on the funds with above average returns for this timeline combo, which are marked in green.
1.3. Again, one wants a few handful ones among these green rows. Therefore one can limit one or few choice per theme, in which case the following are the choices across 5 themes.
1.3.1 Power and Infra theme:
CPSE ETF (Need to buy it as a stock script)
Nippon India Power & Infra Fund
1.3.2 PSU theme:
ABSL PSU Equity Fund
SBI PSU Fund
Kotak Nifty PSU Bank ETF
Nippon India ETF Nifty PSU Bank BeES
Invesco India PSU Equity Fund
1.3.3 Infrastructure theme:
HDFC Infrastructure Fund
Quant Infrastructure Fund
Franklin Build India Fund
Bandhan Infrastructure Fund
Invesco India Infrastructure Fund
LIC MF Infrastructure Fund
ICICI Prudential Infrastructure Fund
Tata Infrastructure Fund
1.3.4 Special themes:
BHARAT 22 ETF
ICICI Prudential BHARAT 22 ETF
DSP TIGER Fund
Franklin India Opportunities Fund
1.3.5 Cap based funds:
Quant Mid Cap Fund
Bandhan Small Cap Fund
Quant Small Cap Fund
Now that I have done this analysis, I will ensure coverage for all these 22 funds in my portfolio as I build my portfolio through next one quarter. Since I do have a policy to churn 30% of my funds with short term gain tax and exit load burdens for projected short term underperformance, and I thrive in details and complexity of portfolio, I am ok to have up to 50 funds in my portfolio. My personal commitment is to demonstrate in my portfolio, the returns above the entire equity funds universe of 820 plus funds amounting to 40% annual return for the current market dynamics. As I mature over years ahead in my MF investments, I will reduce the portfolio to 20 funds or so later.
Option 2. Top funds based on top average return across 1Yr, 3Yr and 5 Yr timelines.
One's arguement could be that my choices of investment are for very long term, so one wants to include 5 yr return too in computing the top return average. Therefore, option 2 is basically a subset of Option 1 where the funds with no 5 yr data are skipped.
2.1 In the table above, only 18 funds from option 1 make to the list as only these funds have 5 yr return data also.
2.2. One should be comfortable to invest in any of these 18 funds, as the lowest combined average return across 1, 3 and 5 yrs is 36.26%, but one may prefer to focus only on the above average returns, which is 43.24%. In such case, only 7 funds make the cut, and they belong to the following themes:
2.2.1 PSU Theme
Kotak Nifty PSU Bank ETF
SBI PSU Fund
Nippon India ETF Nifty PSU Bank BeES
2.2.2 Power & Infrastructure Theme
Nippon India Power & Infra Fund
2.2.3 Infrastructure Theme
Quant Infrastructure Fund
LIC MF Infrastructure Fund
2.2.4 Cap based Fund Theme
Quant Mid Cap Fund
One can reduce the overall choice to only four by picking one per theme here.
Methodology and limitaitons of this quantitative analysis:
1. Only equity funds long term data from Value Research is downloaded. The hybrid funds are ignored as they are unlikely to beat these top equity funds performance benchmarks
2. There are good number of funds with 5 year data but with no 3 year data. This could be a data error on part of Value Research. Since option 1 focuses on 3 Yr performance in addition to 1 Yr performance, such rows had to be ignored. Since option 2 is a subset of option 1, rows with 5 yr return data but with no 3 yr data had to be ignored again.
3. Since Long Term perofmance data of Value Research does not include 1 Yr return, that info is manually populated for the Top 50 funds with 3 yr returns.
4. Since none of the Top 50 funds in option 1 do not have data for timeline beyond 10 yr, columns of 15 and 20 yr are hidden.
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