“It is pointless trying to invest in the #1 fund because #1 changes very fast. Sorting by top returns isn’t an investment strategy. Consistency matters much more,” Gupta stated.
Her comments come in response to a discussion sparked by a report shared by CA Abhishek Murarka, a wealth manager at Angel One Wealth.
The report, authored by Arun Kumar of FundsIndia, highlighted the volatility in mutual fund rankings.
For instance, the mutual fund that ranked number one from 2018 to 2020 has since fallen to 190th place.
Similarly, the second-ranked fund from the same period has dropped to 192nd place.
Conversely, the top-ranked mutual fund from 2021 is one that ranked 160th in the previous cycle.
Gupta’s emphasis on consistency rather than chasing top returns aligns with broader investment principles that caution against short-term thinking.
Many investors are drawn to high-performing funds based on recent returns, often leading to inflows driven by unrealistic expectations.
However, as Gupta notes, this approach overlooks the importance of a fund’s ability to deliver steady returns over the long term.
It is pointless trying to invest in the #1 fund because #1 changes very fast. Sorting by top returns isn’t an investment strategy. Consistency matters much more.
Many research reports have shown data that proves this first line. Again and again. Thanks @FundsIndia for… https://t.co/1mkGL2lRNy— Radhika Gupta (@iRadhikaGupta) August 25, 2024
The FundsIndia report that Gupta referenced further supports her argument by providing historical context.
Despite Indian equity markets experiencing intra-year declines every year, 35 out of the last 44 years have ended with positive returns.
Websites that rank mutual funds typically do so based on discrete returns, which reflect short-term performance.
However, Gupta argues that rolling returns, which measure performance over a longer period and are better indicators of consistency, should be given more weight.