Mutual Funds Analysis - Part 1

February 2nd, 2024 Latest Blogs

Do you know how many funds are current present in the market?

1329! (Source - Association of Mutual Funds in India (AMFI) as of April 17, 2023)*. 

This seems like a big buffet at a 5-star hotel with a person requiring to choose what they will eat! Only thing is, in our view, you will have much more difficulty in selecting the right fund from the Mutual Fund buffet as compared to a 5-star hotel. 

Fund selection is primarily done based on your Risk Profile and your Financial Goals. 

Risk profiling includes 4 things namely:- a) Ability to take risks; b) Need to take risks; c) Willingness to take risks; d)  Reaction to adverse events e.g. if the market falls down & remains down for 6 months, what will be your reaction.

Financial goal setting process includes understanding the when and how much money will be required by an investor. For example, purchase of house, child's education and marriage amongst others. A corpus which looks big at retirement becomes smaller with time. With high inflation, costs increase year on year but the kitty remains same. Additionally, increasing medical costs can have a detrimental impact on your finances. 

We will cover the above 2 topics in greater detail in separate blogs. 

Mutual Funds can be broadly categories under the below:

There are further 38 sub-categories distributed amongst the above major 5 categories. For example, in Equity, there are 12 sub-categories that includes Large Cap, Mid Cap, Small Cap, Multicap, Sectoral, ELSS, Dividend etc.

We have done a preliminary analysis of funds classified under Equity per AMFI data that will share it in this blog. Analysis of other types of funds will be available in subsequent blogs.   

There are 385 such funds present in the market. 

The average returns over the last 1 year by equity funds is 1.2% with the maximum returns of  17.7% and minimum returns of (-)18.5%! A difference of nearly 36%! Ironically, both of the funds belong to ICICI Prudential! 

The average annualized returns over a 3 year period is 26.7% with a maximum being 61.7% (really!) and minimum of 5.2%.  This time the difference is even bigger by 55%! To further emphasize on the impact, a person who invested Rs 10 Lakh in the fund giving 5.2% return would see this portfolio increasing to Rs 12.28 Lakh after 3 years while the person who invested in the top performing fund would have seen his portfolio increase to Rs 42.27 Lakh!! 

A difference of Rs 30 Lakh!!! 

That said, the 10 year returns show a much lesser variation with average at 15% and max and min of 25.7% and 7.1% respectively. 

The above data only highlights the predicament of an investor who is looking to invest and the choices he or she has to make when selecting a fund. The 3 key take-aways from the above data are:

1) While returns can be volatile in the short term, investing for a long term in Equity Mutual Funds provides a source of capital wealth creation

2) An investor should invest in an appropriate fund based on their risk profile and financial goals.  

3) Take professional help in selecting the right fund for your portfolio as you can see the huge opportunity costs of not taking the right fund. 

At FinChikitsak, we are continuously performing market research on funds to help our clients achieve their financial goals. If you are interested to take our services, please contact us on, or reach us on +91-99588-10580 or +91-93197-72504. You can visit our website as well - and download our mobile application. 

We will continue to provide our analysis on Mutual Funds in subsequent blogs. 

* Data Source: AMFI as of April 17, 2023. Analysis has been performed on Regular funds having 1 year of returns.

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