Parameters to Consider
Sharpe Ratio
The Sharpe Ratio measures risk-adjusted return, indicating how much excess return you receive for the extra risk you take. Therefore, an investment with a higher Sharpe Ratio means greater returns
Alpha
Alpha measures the excess or deficit in a fund’s performance against a benchmark index.
Alpha is measured from the base 0
A higher alpha indicates the fund is performing better than the index
Beta
Beta measures fluctuations in the fund against the fluctuations in a benchmark index.
Beta is measured from the base 1
The beta value shows a mutual fund’s sensitivity to a benchmark index. For example, if the value of beta is 0.8, it means that the fund is less volatile. In other words, for every rise or fall of 100% in the benchmark index, the mutual fund has grown or fallen by 80%. Similarly, if the value is 1.2, it means that the fund is more volatile and for every rise or fall of 100% in the index, the fund has grown or fallen by 120%
High beta indicates a higher risk of gain or loss
Standard Deviation
TODO
Parameters I like to have
- Higher Sharpe Ratio
- Higher Alpha
- Higher Beta
Nifty 50 Index Fund
List of Nifty 50 Index Funds: https://www.indmoney.com/mutual-funds/collection/nifty-50-index-funds
Nifty 50 Index Funds Comparision: https://www.indmoney.com/mutual-funds/compare/motilal-oswal-nifty-50-index-fund-direct-growth-vs-uti-nifty-50-index-fund-growth-option-direct-vs-bandhan-nifty-50-index-fund-direct-plan-growth-vs-edelweiss-nifty-50-index-fund-direct-growth
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio |
|---|---|---|---|---|---|---|---|---|
| Bandhan Nifty 50 | Nifty 50 Index Fund | 31.2 | 15.8 | 19.31 | -0.14 | 1 | 0.9 | 0.1 |
| UTI Nifty 50 | Nifty 50 Index Fund | 31.21 | 15.72 | 19.14 | -0.24 | 1 | 0.89 | 0.18 |
| Motilal Oswal Nifty 50 | Nifty 50 Index Fund | 31.3 | 15.76 | -0.23 | 1 | 0.89 | 0.15 | |
| Edelweiss Nifty 50 | Nifty 50 Index Fund | 31.04 | 0.05 | |||||
Based on the above Data, I like to experiment with Edelweiss Nifty 50 as it’s a new fund with a low Expense Ratio.
In Future I would like to try UTI or Motilal Oswal based on Higher Alpha as Beta and Sharpe Ratio are Similar
Nifty Next 50 Index Fund
List of Nifty Next 50 Index Funds: https://www.indmoney.com/mutual-funds/collection/nifty-next-50-index-funds
Nifty Next 50 Funds Comparision: https://www.indmoney.com/mutual-funds/compare/uti-nifty-next-50-index-fund-direct-growth-vs-icici-prudential-nifty-next-50-index-fund-direct-plan-growth-vs-dsp-nifty-next-50-index-fund-direct-growth-vs-edelweiss-nifty-next-50-index-fund-direct-growth
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio |
|---|---|---|---|---|---|---|---|---|
| UTI Nifty Next 50 | Nifty Next 50 Index Fund | 68.37 | 23.39 | 24.05 | -0.4 | 1 | 1.05 | 0.36 |
| ICICI Pru Nifty Next 50 | Nifty Next 50 Index Fund | 68.38 | 23.39 | 23.83 | -0.4 | 1 | 1.05 | 0.31 |
| DSP Nifty Next 50 | Nifty Next 50 Index Fund | 68.39 | 23.52 | 23.92 | -0.28 | 1 | 1.06 | 0.3 |
| Motilal Oswal Nifty Next 50 | Nifty Next 50 Index Fund | 68.32 | 23.42 | -0.36 | 1 | 1.05 | 0.35 | |
| Edelweiss Nifty Next 50 | Nifty Next 50 Index Fund | 68.43 | 0.09 | |||||
Based on the above Data, I like to experiment with Edelweiss Nifty Next 50 as it’s a new fund with a low Expense Ratio and a high 1-year return.
In Future I might switch to DSP Nifty Next 50 or UTI Nifty Next 50 as it performed well in the past 5 years
Midcap Funds
For Mid cap and Small cap investing in an actively managed fund is better than an index fund based on history as active funds gives more returns than index funds
For Midcap it’s completely ok to avoid Momentum Funds too Based on History. Need to update this maybe after 2 or 3 years and verify this statement
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio | Exit Load Duration |
|---|---|---|---|---|---|---|---|---|---|
| Motilal Oswal Midcap Fund Direct | Mid Cap | 69.71 | 40.09 | 35.81 | 12.32 | 0.83 | 1.99 | 0.58 | 1 year |
| Quant Midcap Fund Direct | Mid Cap | 58.69 | 34.17 | 39.84 | 6.5 | 0.88 | 1.6 | 0.58 | 3 months |
| Edelweiss MidCap | Mid Cap | 61.49 | 30.27 | 34.37 | 1.49 | 0.91 | 1.45 | 0.39 | 3 months |
Based on the above Data, It’s better to pick Motilal Oswal MidCap as the percentage returns are high.
Maybe in Future, I would pick Edelweiss MidCap or Quant Midcap
Small Cap Funds
For Small-cap Funds, actively managed funds always beat the small-cap index 250, based on history. So avoiding small-cap index funds
One Problem with Small Cap is most of the Mutual Funds has Exit Load Duration of 1 year.
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio | Exit Load Duration |
|---|---|---|---|---|---|---|---|---|---|
| Quant Small Cap Fund | Small Cap | 56.53 | 34.35 | 51.1 | 5.26 | 0.93 | 1.33 | 0.64 | 1 year |
| Nippon India Small Cap Fund | Small Cap | 50.97 | 34.24 | 39.88 | 9.75 | 0.77 | 1.71 | 0.63 | 1 year |
| Bank of India Small Cap Fund | Small Cap | 54.09 | 29.65 | 41.24 | 5.35 | 0.77 | 1.35 | 0.55 | 1 year |
| Bandhan Small Cap Fund | Small Cap | 76.21 | 31.1 | 1.74 | 0.91 | 1.26 | 0.35 | 1 year |
Based on the above data. I would pick Bandhan Small Cap as it’s performing very well compared to other small-cap funds with less expense ratio and more returns
Maybe in future, I might consider Quant Small Cap or Bank or India Small Cap
Momentum Funds to Compare
- Nifty 200 Momentum 30
- Nifty Midcap 150 Momentum 50
- Low Volatility
Aggressive Funds
These Funds always return more than Nifty 50 as these funds contain mid-cap and small-cap
But avoiding these in my portfolio as I already invest in small and mid-cap funds
Large Cap Funds
These are actively managed funds mostly tracking S&P BSE 100 Total Return Index. Avoiding these as I want to treat Nifty 50 as Low-Risk Safe Funds based on my appetite. And it will overlap lot of my portfolio
Focused Funds
Focused funds pick 30 stocks from the S&P BSE 500 Total Return Index.
https://www.dezerv.in/mutual-funds/equity/focused-funds/
One thing I can do is pick the stocks from these focused funds and invest in them directly.
Value Mutual Funds
Value funds are equity mutual funds where the fund manager looks for stocks that are currently trading at a discount due to some reason but have a lot of potential to grow.
I can pick stocks from these funds and invest in them directly
These are always better than Nifty 50 or Next 50.
Maybe in future when there is Bear Run. I will pick this
Sector-Based Mutual Funds
Technology Sector
The Tech Sector can give returns more than Nifty Next 50 and less than mid-cap funds
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio | Exit Load Duration |
|---|---|---|---|---|---|---|---|---|---|
| Franklin India Technology Fund | Technology Sector | 53.38 | 18.94 | 29.5 | 6.47 | 0.81 | 0.8 | 1.08 | 1 year |
| Tata Digital India Fund | Technology Sector | 50.9 | 15.93 | 30.04 | 5.05 | 0.85 | 0.63 | 0.36 | 30 days |
| ICICI Prudential Technology Fund | Technology Sector | 45.5 | 13.42 | 30.05 | 0.32 | 0.98 | 0.51 | 0.91 | 15 days |
| Aditya Birla Sun Life Digital India | Technology Sector | 39.45 | 14.63 | 29.95 | 1.75 | 0.96 | 0.58 | 0.75 | 30 days |
Based on the above data Franklin India Technology is performing well, but picking Tata Digital India Fund as it’s consistently in the top 25% every year
Infrastructure Sector
The Infra Sector can give returns more than Mid-Cap in the long run.
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | Alpha | Beta | Sharpe Ratio | Expense Ratio | Exit Load Duration |
|---|---|---|---|---|---|---|---|---|---|
| Quant Infrastructure fund | Infrastructure | 70.25 | 35.99 | 41.14 | 5.43 | 1.04 | 1.64 | 0.66 | 3 months |
| Invesco India Infrastructure fund | Infrastructure | 70.41 | 35.02 | 35.38 | 13.2 | 0.88 | 1.83 | 0.71 | 1 year |
| Bandhan Infrastructure fund | Infrastructure | 77.88 | 36.31 | 34.71 | 13.69 | 0.96 | 1.76 | 0.85 | 30 days |
| ICICI Prudential Infrastructure fund | Infrastructure | 61.68 | 40.12 | 33.95 | 17.72 | 0.85 | 2.27 | 1.18 | 15 days |
When Infra funds are explored, most are not investing in Infra Sector Funds. So need to watch and understand more about these funds
Banking Sector
The banking sector can give returns similar to those of Nifty 50. One reason could be it’s the most competitive place
Consumption Sector
These are the funds that focus on consumer trends. These funds mostly give returns near to Nifty Next 50.
Energy Sector
These are the funds that focus on energy-based stocks. These funds mostly give returns more than Nifty Next 50
Transportation and Logistics
These are the funds that focus on Transportation and Logistics stocks. These can give returns more than Mid-cap as transportation is becoming a necessary thing
Healthcare
These are the funds that invest in Pharma and Hospitals. These can give returns near Nifty 50 or Next 50