30 November 2012

Top 10 Mutual Funds in India

Do you know how many mutual fund schemes operate in India? More than 500...

Suppose you plan to invest in some good mutual fund schemes. Assuming you are an average investor like us, how would you select a scheme from 500+ available ones?
One approach can be to choose funds which have consistently given high returns in long term. For example, we choose a period of 10 years. Why 10 years? It's because it would cover multiple business cycles and is long enough to judge a fund’s true performance. In our case, 10 years would cover the period 2002-2012. This decade witnessed the great Indian Bull run (2003-2008), the great fall (2008-2009) and rally from the lows (2009-2011).

Top 10 Mutual Funds in India

We started with funds which have been operational for more than 10 years. Then we sorted them on basis of returns (CAGR). We then came up with a list of top 10 mutual fund schemes, which have given the highest returns in last 10 years.

Caution – A fund’s past performance is no guarantee of future performance. I repeat. A fund’s past performance is no guarantee of future performance. Don’t forget this. :)

So here are India’s top 10 Mutual Funds –


These funds have given returns of around 30% + for 10 years. And that is huge. To better understand the enormity of these returns, assume you invested Rs 10,000 in all ten funds at start of 2002. The value of that investment (if not withdrawn), now stands as given in table below.


An investment of just Rs 10,000 in Reliance Growth Fund turned into a mind boggling Rs 1,73,448 in just 10 years! A similar deposit in bank fixed deposits (@8%) would have just given Rs 21,600.

One of the most common questions from mutual fund investors is about ‘the’ best mutual fund to start a Systematic Investment Plan (SIP). The answer is that we don't know. We don't know which fund would perform the best in coming years. But what we feel is that a long term investor would be better off following a core satellite approach (similar to one suggested in our Dead Monk’s Portfolio). 

We would take up the MF-Core-Satellite discussion in another post. For the time being, we leave you with few initial suggestions:
  • Start with 2-3 Index Funds as the Core of your MF portfolio. (Why Index Funds?)
  • Add smaller SIPs in 2-4 Non-Index funds (You may choose between large cap, mid cap, small cap or multi cap funds, depending on your risk appetite) as Satellites of the Core.
  • While CORE would provide stability to entire portfolio, SATELLITEs having comparatively riskier funds, would have potential for higher returns. Allocation between the two components would depend on investor’s risk appetite. 
Note to Regular Investor – If you are familiar with SIPs and MFs, you might like to read an old post on How to boost your SIP Returns.

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12 comments:

  1. equity.philip9876.com30 November 2012 at 10:01

    I do SIP in 3 of the above mentioned funds....not bad ;)

    ReplyDelete
  2. @ae7a067f6150aae4cf74497821ddaa95:disqus
    That us nice.
    We hope you started the SIPs long time back and not near 2007-08 :)

    ReplyDelete
  3. The return value hypothesis assume you selected top 10 funds of decade in year 2012 (rear view mirror driving). can you verify the data from year 1992 to 2002 and see what all top 10 mutual funds were in that period and then invest in only from those top 10 funds. Finally compare those returns with your current returns ? As that will be correct way of comparison. May be many good mutual funds i your list do not exists at all before year 2000.

    ReplyDelete
  4. @b5061134dfb896af3451ed985db4d4b3:disqus

    We would have loved to do that for all the 10 funds. But as you rightly mentioned, many of these did not exist during 1992-2002. But we will find the data for those which existed and try doing a post on same.
    Thanks for the interesting approach. :)

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  5. @b5061134dfb896af3451ed985db4d4b3:disqus

    We would have loved to do that for all the 10 funds. But as you rightly mentioned, many of these did not exist during 1992-2002. But we will find the data for those which existed and try doing a post on same.
    Thanks for the interesting approach.

    ReplyDelete
  6. If we are doing a horizontal averaging in selecting the core & satellite MFs with wide variety of stocks in the basket and vertical averaging of buying across months in the form of SIPs, with somuch margin of safety, I really doubt an ordinary investor can beat the bank FD returns through investing in MFs for the medium term (5 yrs) which is a comfort period for many.

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  7. equity.philip9876.com3 December 2012 at 12:59

    I started in 2005.

    ReplyDelete
  8. equity.philip9876.com
    That is much better than those who started in 2007-08...
    But those people cannot be blamed for their irrational exuberance. After all, we all learn much more from our own mistakes than others' mistakes and wisdom.

    ReplyDelete
  9. Krish

    Over-diversification does cap the potential upside. There is no denying this fact. But it also helps in capping the downside. Having just 1 or 2 funds exposes investors to multiple risks like failure of fund management team, failure of 'few' businesses invested in, etc.

    We feel that having 4-6 mutual funds is a sensible way to go for ordinary investors. An ordinary investor does not have expertise or time to pick individual stocks or select just 1/2 mutual funds. He would be better off spreading his risk among multiple asset classes - MFs, stocks, FDs, etc.
    But in case investor has skill and risk-appetite for taking focused bets on individual stocks & mutual funds, then he definitely has a higher chance of getting higher returns. But this comes problem of higher risk.

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  10. how you have calculate please give the formula

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  11. @d8f6cac80b541bac60ac606cfc6fd999:disqus

    CAGRs (in % terms) have been taken from moneycontrol [dot] com

    ReplyDelete
  12. So do you suggest one doesnt invest in these MFs anymore? Which ones do you suggest now?

    ReplyDelete

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