The Best Mutual Fund For 2023? It's Easy If You Do It Smart

Howdy TaxAddicters.

Today, we will discuss the best performing mutual funds of the past decade and in our unique style of a conversation between Krishna & Arjuna (Fictional Characters). I'll present the results with a lot of data and insights.

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➽Arjuna (Fictional Character): Krishna, now a days all are became intelligent in the form of saving taxes on their Income by making various type of investments except me.

➽Krishna (Fictional Character): Arjuna, you can also save taxes on your income too by making investments. Currently most of the people interesting to invest in Stock markets. But, Investing in Stock market without knowing about the market risks is very dangerous.

Read : Is Hindenburg vs Adani case A Scam?

➽Arjuna (Fictional Character): Krishna, I have planned to invest in Mutual funds as this type of investment was famous in terms of both as an investment and as 100% deduction in tax saving. But I am confused with selecting the Schemes of Mutual fund in which I have choose to invest. Krishna, please help me in choosing the best mutual funds in this 2023.

➽Krishna (Fictional Character): Arjuna, I want to explain this with a story. I have a friend and we are part of a WhatsApp group. One day he asked a very important question on the group. He told us he wants to change cities and wanted to know where should he move.

He wanted us to tell him which city is the best for him. Now he has an online business so he can work from anywhere. After he asked the question, everyone started giving him suggestions.

Someone said Bengaluru. Another one said Chennai. One friend asked him to consider Hyderabad. There were plenty of recommendations while planning this analysis, I came up with a similar challenge. I wanted to share a list of the best and consistently performing mutual funds and I have the list. But I have used the criteria I think is the best. You can refer to this data, but you must determine what's best for you.

Let's start with the identification. I mean, let's first determine which mutual fund schemes should be a part of this study. To keep the list relevant, we decided to set some boundaries. First, we kept the study limited to five categories.

Criteria 1: Include Schemes in Relevant Category:- These include -

Large cap funds,
Large and mid-cap funds,
Multi-caps,
Flexi caps and
ELSS fund.

We chose these five as they include a sufficiently large number of schemes.

Criteria 2:

Funds that were in existence for more than ten years

and

Criteria 3:

Direct funds only.

This way, a more meaningful conclusion could be made about the performance and consistency of the funds. So what originally started as a wide universe of 362 funds now became a more manageable but sizable universe of 92 schemes.

The next step was to evaluate the funds. Most of the researchers decided to use the quartile system to evaluate performance and consistency. They did not use the ranking system as it was to validate the quartile system. On the other hand, give us more workable results.

The Quartile system works exactly the way it was taught in school.

The top 25% of performers are Q 1 awkwardly one.
The second 25% are labeled as Q 2.
Then comes Q3 and
Least performers 25% of funds are Q4.

And with this, we have the building blocks of our study. A list of 92 mutual fund schemes and the quartile ranking of each scheme over ten years.

➽Arjuna (Fictional Character): So, Krishna, which funds are the best for me? Please suggest in this regard.

➽Krishna (Fictional Character): Arjuna, as we discussed earlier, the word best can mean different things to different people. For you, it might mean the top performer, but for someone else it might be a fund with the least volatility. Someone may prefer consistency over returns.

For this reason, I decided to examine the data more in form of questions that a regular investor (You) might pose. In fact, let's start with the question that I posed to Investor(You).

1.Are there any funds that have been in Q1 for all ten years?

The question was an interesting one. I was keen to know, if any fund has consistently managed to be within the top 25% over the years.

Unfortunately, there has been no such fund, not even a single fund was in the top quartile, all ten years. However, this question was a good starting point.

The next question was,

2. Are there any funds that have been in Q1 for at least seven years?

And the answer to this question was positive. But surprisingly, there is only one scheme that qualifies this way that only Mirae asset emerging Bluechip has managed to be in the top quartile in eight of the last ten years.

Year	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Mirae Asset Emerging Blue Chip	Q1	Q1	Q1	Q1	Q1	Q3	Q1	Q1	Q1	Q3

Now let's relax the filter to see if we can get more funds that qualified the criteria. So,

3. How many funds have spent six or more years in Q1?

The answer to this is six funds.

Scheme	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Mirae Asset Emerging Blue Chip	Q1	Q1	Q1	Q1	Q1	Q3	Q1	Q1	Q1	Q3
Axis Long Term Equity Fund	Q1	Q1	Q1	Q4	Q2	Q1	Q1	Q1	Q4	Q4
Invesco India Multicap Fund	Q1	Q1	Q1	Q4	Q1	Q4	Q4	Q1	Q1	Q4
Quant Large & Midcap Fund	Q4	Q1	Q1	Q1	Q1	Q4	Q4	Q1	Q1	Q1
Quant Flexi Cap Fund	Q4	Q1	Q3	Q1	Q1	Q4	Q4	Q1	Q1	Q1
Quant Tax Plan	Q4	Q1	Q1	Q1	Q3	Q3	Q4	Q1	Q1	Q1

Read: The secret behind the calculation of GST on Second hand goods (Margin Scheme)

But before you start investing in these six schemes, it's always a good practice to go deeper into the information. We can observe that there have been multiple quarters when these funds were in Q4.

To be more specific Check Invesco India Multicap Fund:

Year	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Invesco India Multicap Fund	Q1	Q1	Q1	Q4	Q1	Q4	Q4	Q1	Q1	Q4

The fund is either in the top quartile or the bottom quartile. The fund has given extreme returns. This can be an important factor to consider.

Let's not stop here. Let's try a few more scenarios. So,

4. Are there any schemes which have never spent a single year in Q4?

Yes, they are not one, but eight such schemes. The schemes were never in the bottom quartile in the past ten years.

Scheme	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Mirae Asset Emerging Blue Chip	Q1	Q1	Q1	Q1	Q1	Q3	Q1	Q1	Q1	Q3
ICICI Pru Bluechip Fund	Q1	Q3	Q3	Q1	Q3	Q1	Q2	Q3	Q3	Q1
Mirae Asset Large Cap fund	Q1	Q2	Q2	Q1	Q2	Q1	Q1	Q3	Q3	Q3
Invesco India growth opp fund	Q1	Q3	Q2	Q2	Q1	Q1	Q2	Q3	Q3	Q3
Tata Large & Mid cap fund	Q2	Q2	Q1	Q3	Q3	Q3	Q1	Q3	Q3	Q1
Aditya Birla SL Frontline Equity fund	Q1	Q3	Q3	Q1	Q3	Q2	Q3	Q3	Q3	Q2
DSP Tax saver fund	Q2	Q2	Q2	Q1	Q2	Q3	Q1	Q2	Q2	Q2
Aditya Birla SL Flexi Cap Fund	Q2	Q1	Q2	Q1	Q3	Q2	Q3	Q2	Q3	Q3

Having said this, let's look at the reverse as well.

5. Are there any schemes that have never spent even a year into Q1?

And the answer to that is yes. There are in fact six schemes that have never been in the top 25% performers list in any of the last ten years.

Scheme	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
IDFC Large Cap Fund	Q2	Q4	Q4	Q2	Q3	Q2	Q2	Q2	Q3	Q4
Tata Large Cap fund	Q2	Q4	Q3	Q3	Q4	Q2	Q2	Q4	Q3	Q2
Sundaram Diversified Equity	Q4	Q3	Q3	Q2	Q2	Q4	Q3	Q4	Q3	Q2
LIC MF Tax Plan	Q2	Q2	Q4	Q3	Q2	Q2	Q2	Q4	Q4	Q4
Franklin India Bluechip fund	Q3	Q4	Q3	Q2	Q4	Q2	Q4	Q3	Q2	Q4
Taurus Flexi Cap Fund	Q4	Q4	Q4	Q4	Q3	Q4	Q4	Q4	Q4	Q2

Now, this is some good information. Investor(you) can probably avoid these ones. By now you must be getting an idea behind the efficacy of the study.

We wanted to give you a framework to evaluate mutual funds that you think are the best for you. And the best part is that you can shape it in any way you like.

➽Arjuna (Fictional Character): Krishna, out of these schemes, could you please suggest me any schemes to get more benefit.

➽Krishna (Fictional Character): Arjuna, Here's one example You may prefer a list of schemes that have spent at least 80% of the time in Q1 or Q2.

If you like these criteria, then there are four such funds. You can see the names below:

DSP Tax Saver Plan
Invesco India Tax Plan
SBI Blue Chip Plan and
Mirae Asset Emerging Bluechip

➽Arjuna (Fictional Character): Krishna, what if my criteria are a bit more relaxed? Maybe I want a scheme that has spent at least 70% of the time in Q1 and Q2.

➽Krishna (Fictional Character): Arjuna, in that case, there are 14 funds. You can try a combination of criteria.

Scheme	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Mirae Asset Emerging Blue Chip	Q1	Q1	Q1	Q1	Q1	Q3	Q1	Q1	Q1	Q3
Invesco India Tax Plan	Q1	Q2	Q1	Q2	Q2	Q1	Q2	Q1	Q2	Q4
Mirae Asset Large Cap fund	Q1	Q2	Q2	Q1	Q2	Q1	Q1	Q3	Q3	Q3
SBI Bluechip Fund	Q2	Q2	Q1	Q2	Q3	Q2	Q2	Q2	Q4	Q2
Franklin India Flexi cap fund	Q3	Q1	Q2	Q2	Q3	Q2	Q4	Q2	Q1	Q2
Baroda BNP Paribus Large Cap fund	Q2	Q3	Q1	Q4	Q2	Q2	Q1	Q2	Q4	Q2
DSP Tax saver fund	Q2	Q2	Q2	Q1	Q2	Q3	Q1	Q2	Q2	Q2
Kotak Tax Saver fund	Q4	Q1	Q3	Q1	Q3	Q2	Q1	Q2	Q2	Q1
Aditya Birla Equity Advantage fund	Q2	Q1	Q2	Q1	Q1	Q4	Q3	Q2	Q1	Q4
SBI Large & Mid cap fund	Q1	Q2	Q1	Q4	Q1	Q3	Q3	Q2	Q1	Q1
Quant Active fund	Q4	Q1	Q1	Q4	Q2	Q2	Q4	Q1	Q1	Q1
Axis Long Term Equity Fund	Q1	Q1	Q1	Q4	Q2	Q1	Q1	Q1	Q4	Q4
ICICI Pru LT Equity fund (Tax saving)	Q1	Q2	Q2	Q2	Q4	Q1	Q3	Q3	Q2	Q2
Edelweiss large & mid cap fund	Q3	Q3	Q2	Q4	Q2	Q2	Q2	Q2	Q1	Q2

Let's try one here.

First, we want schemes that have spent at least 70% of the time in Q1 or Q2.
Second, such schemes never gave negative returns in the last five years.

It's a pretty strict criteria, but there have been two such funds from a universe of 92 funds.

Scheme	2018	2019	2020	2021	2022
ICICI Pru LT Equity fund (Tax saving)	Q1	Q3	Q3	Q2	Q2
Mirae Asset Large Cap fund	Q1	Q1	Q3	Q3	Q3

They are ICICI Prudential, Long Term Equity Fund and Mirae Asset Large Cap Fund on similar lines.

One can look at many many criteria in combination and then select a scheme that suits one's needs.

➽Arjuna (Fictional Character): Krishna, I understood the above analysis. Then tell me your opinion about Best mutual funds.

➽Krishna (Fictional Character): Arjuna, I didn't complete my friend's story. I asked him the reason for shifting. He wanted to shift as the pollution in the city affected his son's health. I followed up with one more question. What does he expect from the new city? He wanted to move to a city with lower pollution and decent schools.

As soon as he laid on this criterion, the recommendations from the friends changed. He's still evaluating. Maybe you can suggest a nicely before him in the comment section.

But the same is true in the case of mutual funds. There is no best mutual fund. It depends on your requirement.

Very early in the process, we realized that people look at best differently. So, I worked on giving you a framework and necessary tools to select the mutual fund that you think is the best for you.

Let us know if this approach worked for you. I hope you like this post and will draw many learnings from the data and insights.

Don't forget to share this post with your friends and colleagues.

Note : Mutual fund investments are subject to market risks.

Read all scheme related documents carefully.

I look forward to catching up with you soon with another insightful post.

Source: ET Money

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