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Standing Tall in the Long-run

Most of 2007's top equity funds have suffered majorly in 2008, emphasizing that long-term performers are better picks...

We have been screaming ourselves hoarse that investors must never buy into a fund simply on the basis of its recent performance. Or, even sell for that matter. And looking at how some of the hot shots of the past have fared and how some of the dogs have risen, we stand vindicated.

The annual return of diversified equity funds in 2007 was 60 per cent. Three funds actually delivered returns in excess of 100 per cent. At that time, equity looked pretty unbeatable. Almost a year down the road (December 8, 2008), and most of these funds are not in sight. In fact, funds which were shunned are the current stars while some of last year's best performers are languishing somewhere down the ladder.

There are as many as 14 equity diversified funds that have landed up in the bottom of the category which were top quartile performers in 2007.

Apart from three funds (UTI Dividend Yield, DSP BR Equity, UTI Opportunities) which managed to maintain their top quartile position in 2008, all other top performers of 2007 are nowhere near to the top.

On the other hand, 15 funds which were fourth quartile performers in 2007 are top quartile ones now.

Laggards Become Leaders    
Scheme Name Rank in 2007 Rank in 2008
Birla Sun Life MNC 159 12
Kotak MNC 153 33
FT India Life Stage FoF 20s 152 2
ICICI Prudential Dynamic 147 20
UTI Contra 146 7
Birla Sun Life Asset Allocation Aggressive 145 1
ICICI Prudential Growth 141 25
Quantum Long Term Equity 136 26
ICICI Prudential Advisor-Very Aggressive 135 40
HDFC Index Sensex Plus 133 16
Sahara Wealth Plus Fixed Pricing 131 24
Birla Sun Life Top 100 130 34
Franklin India Bluechip 128 30
UTI Equity 127 11

Leaders Become Laggards
Scheme Name  Rank in 2007  Rank in 2008
Sundaram BNP Paribas Rural India Reg 38 161
Magnum Midcap 35 188
Birla Sun Life Infrastructure 29 155
Sahara Mid-Cap Fund 28 146
Tata Equity Opportunities 26 156
Birla Sun Life Basic Industries 22 153
Magnum COMMA 14 148
DBS Chola Opportunities 13 158
Sundaram BNP Paribas CAPEX Opp Reg-G 11 162
Canara Robeco Infrastructure 9 147
JM Emerging Leaders 4 192
Taurus Discovery 3 189
JM Basic 1 190

Moral of the story: Always look at the long-term performance of a fund and how it has fared over various phases in the market. Consistency is more important than recent sporadic bursts or dips.