Top 10 Best SIP Mutual Funds to invest in India in 2016

Recently few readers of the blog started to inquire about Top 10 Best SIP Mutual Funds to invest in India in 2016. I just ignored the suggestion as 2016 was more than 3-4 months away. Now I felt it was necessary to review the old recommendations and suggest the new funds for 2016.

Note-

• Refer our latest post related to Top 10 Best SIP Mutual Funds to invest in India in 2017 at “Top 10 Best SIP Mutual Funds to invest in India in 2017“. 
• We disabled commenting feature for this particular post. If you have any doubts based on this post, you can raise the same in our blog forum of BasuNivesh Forum.

Before proceeding further, let us first discuss on the last year’s fund returns and how they performed.

Let us go forward and discuss on Top 10 Best SIP Mutual Funds to invest in India in 2016.

How I am selecting the funds?

This time, I have been using more advanced criteria to arrive at my fund selection. I know, many just follow the return aspect of funds to arrive at the decision to fund. But in my case, I first screened the top 15 funds in each category based on their returns to benchmark since inception. The funds who consistently beaten the benchmark are listed in that 15. Once I have the list in my hand, then I selected the funds based on Risk-Return Analyzer. It is eye catching to select the funds which will give you good returns. However, at what cost it is giving you a better return? To what extent it protects my investment during a downturn is what differentiate from good fund to bad fund.

Again, I am not saying that these 1o funds alone be considered as “Top 10 Best SIP Mutual Funds to invest in India in 2016”. There may be fewer funds, which are good to compete with these funds. However, I may be biased towards few Mutual Fund Companies (purely on their size and how long they are in MF business in India). Below are the metrics I used to arrive at finally selecting the funds.

If the fund cleared all these tests and given me around a minimum of 80% score since inception, will be added to my list.

1. Beta-Volatility measure and tell how much the fund changes for a given change in the Index. Lower the beta, lower the volatility. Hence, your fund must have lower beta.
2. Standard deviation-It tells us how for a given set of returns, how much do fund returns deviate from the average. Lower the standard deviation, lower the volatility. Hence, your fund must have lower beta.
3. Alpha-It is the risk-adjusted measure. By taking risks, how much the fund manager generated the return over the benchmark. Higher the alpha, higher the outperformance of the fund.
4. Sharpe Ratio-It is the risk-adjusted measure. Higher the Sharpe ratio, better is the performance.
5. Sortino Ratio-It is the risk-adjusted measure. Higher the Sortino ratio, better is the performance.
6. Treynor Ratio-It is also be known as reward ratio. Higher the Treynor ratio, better is the performance.
7. Information Ratio-This is calculated by average excess return obtained compared to a benchmark and divides it by the standard deviation of excess returns. Higher the information ratio, higher the consistency in beating benchmark.
8. Omega Ratio- It is a risk-return performance measure of an investment asset.
9. Downside deviation-This is also be called as BAD RISK.
10. Upside potential-This is exactly the opposite of Downside deviation.
11. R-squared- It is a measure of how correlated the fund’s NAV movement is with its index.
12. SIP Returns-For how many times the fund’s returns are above the index when we invest in SIP.
13. Lump Sum Returns-For how many times the fund’s returns are above the index when we invest in a lump sum.

Why I selected two funds in each category?

I think one fund from each category is enough to create a best equity portfolio (even a debt portfolio by using equity-oriented balanced funds). Hence, I stick to the fund selection of maximum two in each category.

Owning many funds is not a great diversification strategy and at the same time, few feel to diversify their investment among AMCs. That, I think not at all a good idea.

Best two Large Cap Funds to Invest in India in 2016

In this category, I stuck to my last year’s funds. No change in this. Because both funds are performing well. I found Birla Sunlife Frontline Equity Fund best instead of ICICI Bluechip. However, I still stick to ICICI than Birla.

You notice that Risk-Return score for both funds is above 80%.

Best two Large and Mid Cap Funds to Invest in India in 2016

This year I added ICICI Pru Discovery Fund and removed ICICI Pru Dynamic Fund. The reason is below chart. Here Fund A represents ICICI Value Discovery and Fund B ICICI Pru Dynamic Fund. ICICI Pru Discovery outperformed the ICICI Pru Dynamic Fund many a time. Hence, switching, but within the same fund house.

Best two Mid and Small Cap Funds to Invest in India in 2016

In this category, I retained HDFC Mid-Cap Opportunities Fund and switched from earlier Reliance Equity Opp Fund to Franklin India Prima Fund. You can also have in mind about the funds like UTI or SBI Magnum Mid Cap Funds.

Best two Equity Oriented Balanced Funds to Invest in India in 2016

I retained HDFC Balanced Fund and ICICI Balanced Fund. I suggest to think of Tata Balanced Fund too.

Best two Tax Saving Mutual Funds (ELSS) to Invest in India in 2015

I retained both Franklin India Tax Shield and ICICI Pru Tax Plan.

I noticed that ICICI Fund is a little bit under performing this year. But let us give some time to it. If it continues its low performance, then we can think of switching.

Read my latest post on Top 5 ELSS or Tax Saving Mutual Funds to invest in 2016

• Top 5 Best ELSS or Tax saving Mutual Funds to invest in 2016

Note-We disabled commenting feature for this particular post. If you have any doubts based on this post, you can raise the same in our blog forum of BasuNivesh Forum.