This article explores if the worst performing equity mutual funds have beat FD and RD returns.
Do the worst performing equity mutual funds beat FD?
Posted on 18 Oct 2023
Author: Sayan Sircar
10 mins read
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This article explores if the worst performing equity mutual funds have beat FD and RD returns.
Disclaimer: Mutual funds names in the article are not recommendations to invest in those funds. Infact given that these funds are the worst performers historically, no rational investor should invest in them.
📚 Topics covered:
- Why compare FDs and mutual funds?
- FD rates pre and post tax
- Equity mutual funds and their taxation
- Worst SIP vs. FD
- Worst SIP vs. RD
- Caveats with this analysis
Why compare FDs and mutual funds?
A very common comparison that investors look for and see from many sales pitches is the FD vs. mutual fund debate. This is a classic apples to oranges comparison that we have ourselves covered here: Mutual Fund vs Fixed Deposit - where should you invest?.
A recent take on this debate says: “Did you know that even the worst performing equity mutual funds has beaten FD. Imagine what the best performing MF has done.” We will now examine the claim of worst-FD vs equity mutual funds.Join the Arthgyaan WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.
FD rates pre and post tax
We are taking the example of FD rates from the SBI website and have calculated the after tax returns in the 30% tax bracket. We have chosen SBI since it is one of the safest banks in India and forms the basis of comparing against other investments.
The table below shows the historical 3,5 and 10Y FD/RD rates from the SBI website as on 13-Oct-2023. The actual FD returns, if you adjust for the tax you need to pay every year, will be slightly less than the post-tax figures in the table below.
|SBI FD Rates||Rate announced on||Pre-tax||Post Tax (30%)|
Equity mutual funds and their taxation
We have taken data from Valueresearchonline for 13-Oct-2023 for all equity mutual fund categories except international and thematic / sector funds.
Taxation of equity mutual funds is taken as per the latest rate of 10% tax on profits for after being held longer than 1 year.
Worst SIP vs. FD
Worst 3 year Lumpsum vs. FD
|Fund name||3Y Lumpsum %||3Y after-tax %|
|SBI 3-Y FD||5.30||3.95|
|Nippon India ETF Nifty 50 Shariah BeES||11.41||10.37|
|Aditya Birla Sun Life ELSS Tax Relief 96||12.90||11.74|
|Axis Focused 25 Fund||13.33||12.14|
|Aditya Birla Sun Life Retirement Fund||14.85||13.53|
|Axis Bluechip Fund||15.01||13.68|
|Aditya Birla Sun Life Bal Bhavishya Yojna||15.69||14.31|
|Taurus Largecap Equity Fund||15.83||14.44|
|Motilal Oswal Flexi Cap Fund||15.98||14.58|
|Bandhan Focused Equity Fund||16.20||14.78|
|Axis Long Term Equity Fund||16.49||15.05|
Worst 5 year Lumpsum vs. FD
|Fund name||5Y Lumpsum %||5Y after-tax %|
|SBI 5-Y FD||6.85||5.19|
|Aditya Birla Sun Life ELSS Tax Relief 96||9.84||9.00|
|Taurus Flexi Cap Fund||11.09||10.17|
|Taurus Largecap Equity Fund||11.09||10.17|
|ICICI Prudential Nifty Next 50 Index Fund||11.71||10.74|
|LIC MF Nifty Next 50 Index Fund||11.79||10.82|
|Motilal Oswal Flexi Cap Fund||11.87||10.89|
|Axis Focused 25 Fund||12.00||11.01|
|UTI Nifty Next 50 Index Fund||12.01||11.02|
|ICICI Prudential Nifty Next 50 ETF||12.10||11.11|
|Nippon India ETF Nifty Next 50 Junior BeES||12.12||11.13|
Worst 10 year Lumpsum vs. FD
|Fund name||10Y Lumpsum %||10Y after-tax %|
|SBI 10-Y FD||8.75||6.74|
|Taurus Flexi Cap Fund||11.66||10.89|
|Taurus Largecap Equity Fund||11.71||10.94|
|Sundaram Nifty 100 Equal Weight Fund||11.73||10.96|
|Nippon India ETF Nifty 50 Shariah BeES||11.84||11.06|
|Aditya Birla Sun Life Nifty 50 Index Fund||12.86||12.04|
|LIC MF S&P BSE Sensex Index Plan||12.89||12.07|
|DSP Top 100 Equity Fund||12.93||12.11|
|Franklin India NSE Nifty 50 Index||13.03||12.21|
|LIC MF Nifty 50 Index Plan||13.04||12.21|
|Nippon India ETF Nifty 100||13.09||12.26|
Worst SIP vs. RD
Worst 3 year SIP vs. RD
|Fund name||3Y SIP %||3Y SIP after-tax%|
|Axis Focused 25 Fund||5.09||4.60|
|SBI 3-Y RD||5.30||3.95|
|Nippon India ETF Nifty 50 Shariah BeES||6.46||5.85|
|UTI Flexi Cap Fund||8.21||7.44|
|Axis Long Term Equity Fund||8.61||7.81|
|Axis Bluechip Fund||8.64||7.84|
|Aditya Birla Sun Life ELSS Tax Relief 96||9.48||8.60|
|LIC MF Large Cap Fund||9.66||8.77|
|Axis Flexi Cap Fund||10.10||9.17|
|HSBC Nifty Next 50 Index Fund||10.25||9.31|
|Nippon India Nifty Next 50 Junior BeES FoF||10.43||9.47|
Worst 5 year SIP vs. RD
|Fund name||5Y SIP %||5Y SIP after-tax%|
|SBI 5-Y RD||6.85||5.19|
|Axis Focused 25 Fund||10.48||9.60|
|Aditya Birla Sun Life ELSS Tax Relief 96||10.97||10.05|
|Nippon India ETF Nifty 50 Shariah BeES||12.50||11.48|
|Axis Long Term Equity Fund||12.62||11.59|
|Axis Bluechip Fund||12.68||11.65|
|Taurus Largecap Equity Fund||12.91||11.86|
|LIC MF Large Cap Fund||13.25||12.18|
|ICICI Prudential Nifty Next 50 Index Fund||13.31||12.24|
|LIC MF Nifty Next 50 Index Fund||13.34||12.26|
|UTI Nifty Next 50 Index Fund||13.48||12.40|
Worst 10 year SIP vs. RD
|Fund name||10Y SIP %||10Y SIP after-tax%|
|SBI 10-Y RD||8.75||6.74|
|Taurus Largecap Equity Fund||10.12||9.42|
|Taurus Flexi Cap Fund||10.27||9.56|
|Aditya Birla Sun Life ELSS Tax Relief 96||11.39||10.63|
|LIC MF Flexi Cap Fund||11.45||10.69|
|Nippon India ETF Nifty 50 Shariah BeES||11.59||10.82|
|DSP Top 100 Equity Fund||11.75||10.98|
|LIC MF Nifty Next 50 Index Fund||11.87||11.09|
|ICICI Prudential Nifty Next 50 Index Fund||11.89||11.11|
|Sundaram Nifty 100 Equal Weight Fund||11.90||11.12|
|LIC MF Large Cap Fund||12.02||11.24|
Caveats with this analysis
There are some obvious caveats with the data shown above
- this data is point to point and not rolling. Rolling returns paint a true picture since you can choose the start and end points to prove any point
- it does not make sense to compare a fixed return product with minimal risk like FD with a volatile investment like equity mutual funds. However, this FD vs worst MF comparison is a very common sales pitch used to sell mutual funds and therefore you need to be aware of the risks
- the worst MF list will change the next time this list is prepared and there is no guarantee that FDs will be still beaten by the worst performing MF
- you should not use this analysis for investing 100% in equity mutual funds for any goals less than 10 years. We will cover this particular point in a future article
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This post titled Do the worst performing equity mutual funds beat FD? first appeared on 18 Oct 2023 at https://arthgyaan.com
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