Best Mutual Fund SIPs to Invest in December 2024
Many investors get confused about choosing the right mutual fund to save for their long-term goals, like retirement. For those who have a clear plan, a carefully selected mutual fund portfolio can be a big help in reaching those goals. Equity, debt, and hybrid mutual funds have been evaluated based on a detailed methodology to empower investors with the right recommendations.
Selecting the right mutual fund schemes can be challenging, especially for new investors who want to build a portfolio tailored to their financial goals. Long-term objectives, like retirement planning, often require a balanced mix of schemes. Below is a recommendation for SIP portfolios based on three investor categories—Conservative, Moderate, and Aggressive.
1. Conservative Investor Portfolio
- Canara Robeco Bluechip Equity Fund
- ICICI Prudential Regular Savings Fund
- Mirae Asset Large Cap Fund
- Parag Parikh Flexi Cap Fund
2. Moderate Investor Portfolio
- Canara Robeco Bluechip Equity Fund
- ICICI Prudential Regular Savings Fund
- Parag Parikh Flexi Cap Fund
- Mirae Asset Hybrid Equity Fund
3. Aggressive Investor Portfolio
- Parag Parikh Flexi Cap Fund
- Canara Robeco Bluechip Equity Fund
- Mirae Asset Hybrid Equity Fund
- PGIM India Midcap Opportunities Fund
- Axis Small Cap Fund
- Axis Growth Opportunities Fund
Methodology for Equity Funds
The following parameters were applied to short-list equity mutual fund schemes:
1. Mean Rolling Returns: Daily rolling returns over the last three years were analysed to assess performance consistency.
2. Consistency: The Hurst Exponent (H) was used to measure the predictability of a fund’s net asset value (NAV) series.
- If H = 0.5, then returns series is geometric Brownian motion and hence can’t predict easily.
- If H < 0.5, then returns will be moving toward the mean.
- If H > 0.5, returns series tend to persist, meaning they are moving with a strong trend.
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: Jensen’s Alpha, computed over the last three years, served as the measure of the risk-adjusted returns with respect to the expected market returns as estimated by the CAPM. The greater Alpha meant that the better is the performance.
5. Asset Size: Those equity funds with a minimum asset size of Rs 50 crore are eligible.
Methodology for Debt Funds
The debt funds were evaluated using the following criteria:
1. Mean Rolling Returns: Daily rolling returns for the last three years were analysed.
2. Consistency: The Hurst Exponent was applied to determine the stability of NAV trends, similar to the approach for equity funds.
3. Downside Risk: The same formula used in the case of equity funds was applied for calculating the negative returns.
4. Outperformance: The active return of a fund was calculated as the difference between the benchmark return and fund return.
5. Asset Size: Debt funds which had an asset under management of Rs 50 crore and more qualified for consideration.
Methodology for Hybrid Funds
The parameters to assess hybrid funds were:
1. Mean Rolling Returns: Three years of daily rolling returns were studied.
2. Consistency: The Hurst Exponent was used to study NAV trends, which were divided into random, mean reverting, and persistent types.
3. Downside Risk: Similar to equity and debt funds, the downside risk formula was applied to measure negative returns.
4. Outperformance:
- Equity Portion: Measured by Jensen’s Alpha, as in equity funds.
- Debt Portion: Active return was calculated as the difference between the fund return and the benchmark return.
5. Asset Size: Hybrid funds with an AUM of Rs.50 crore or more were included.
Why Selection Criteria is Important?
The selection process focuses on choosing those funds that perform well over time, have lower risks, and provide better returns compared to the risks taken. By looking at factors like average returns, how much the fund can lose in tough times, and how consistent it is, investors can feel more confident about their choices.
This approach makes it easier for investors to choose the right mutual funds that match their long-term financial goals.
