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Summary: Everyone has a theory about flexi-cap funds. “Active is better”, “lazy is safer”, “turnover tells the truth”… but what does the data actually say? And more importantly, is a fund’s turnover ratio a meaningful metric to judge before you invest? Let’s find out.
Flexi-cap funds have become the comfort food of Indian investors. Most investors have one, and for good reason. At Value Research, too, we recommend a flexi-cap fund as the core of your investment portfolio.
Historically, too, flexi-cap funds have done well. An average flexi-cap fund has posted a 17.7 per cent annualised return in the last five years and 14 per cent in the last 10 years. No wonder this category is the biggest beast in the mutual fund jungle, managing over Rs 5.3 lakh crore, as of October 31, 2025.
But here’s the real question: Is there a pattern one can check to pick a solid flexi-cap, one that can do better than others?
Recently, a YouTuber labelled a well-known flexi-cap fund as ‘bad’ simply because it had a high turnover ratio. This got me thinking: “Does a higher turnover ratio really mean a fund is bad? Does being ‘active’ help? Or do ‘lazy’, low-churn funds win?”
To answer this, I took a quick dive into data. (Wait for the conclusion because that would be the most important takeaway.)
But first, what on earth is a turnover ratio?
The turnover ratio tells you how much of a fund’s portfolio changed in a year.
For instance, a turnover of 100 per cent means a fund’s entire portfolio has changed within 12 months, a full clean-out.
Broadly:
- Higher turnover means more buying and selling of stocks.
- Lower turnover means fewer changes and a more buy-and-hold investment strategy.
Now that we understand what a turnover ratio is, let’s understand whether a high turnover flexi-cap fund performs better or not.
To answer this, we analysed all flexi-cap funds with at least 10 years of history and examined their monthly turnover ratios since June 2017, a few months after the Association of Mutual Funds in India (AMFI) formally re-defined investment rules of the flexi-cap universe.
And here’s what floated to the top:
To judge the trio fairly, we needed a metric that captures consistency. That’s why we looked at rolling returns. So, for each day between June 1, 2020 and November 18, 2025, we measured the three funds’ three-year return, and here’s what we found:
3 highest-turnover flexi-cap funds
| Flexi-cap fund (Direct) | Turnover | Return (%) | Beat benchmark (16.9%)? |
|---|---|---|---|
| PGIM | 160% | 19.7 | Yes |
| Taurus | 153.90% | 11.7 | No |
| LIC | 81% | 14.4 | No |
Essentially, only one of the three high-churn funds (PGIM) beat the benchmark. The others—despite all the hyperactivity—fell short. Hence, being ‘active’ doesn’t guarantee superior performance.
What about the ‘lazy’ low-turnover funds?
The three flexi-cap funds with the lowest turnover ratio and their average three-year return between June 1, 2020 and November 18, 2025, are as below:
|
Fund
|
Turnover | Return (%) | Beat benchmark? |
| Parag Parikh | 9.60% | 22.3 | Yes |
| UTI | 11.80% | 15.3 | No |
| Kotak | 17.40% | 15.8 | No |
Good news first. Parag Parikh Flexi Cap—famous for its buy-and-hold style—delivered a superb 22.3 per cent, comfortably beating the benchmark.
Not-so-good news: The other two low-churn funds didn’t beat the benchmark.
It means that even the ‘lazy’ crew was no better than the active ones.
Moral of the story
And this is the most important part of the story.
Turnover ratios in mutual funds are, frankly, overrated.
That’s because there’s no standard way to calculate the turnover ratio.
On paper, the definition of turnover is simple. It is the percentage of a fund’s portfolio that has been bought or sold in a year. But in practice? Fund houses follow different rulebooks.
- Some include only the trades the fund manager makes.
- Some add stock sales triggered by investor redemptions.
- Some exclude redemptions entirely.
- So on and so forth
So, a fund with a seemingly high turnover ratio may not actually be trading aggressively; it may just be calculating differently. With no uniformity in calculating turnover ratios, comparing funds based on them becomes pointless.
This is exactly why analysts at Value Research don't rely on the turnover ratio.
We publish the number because it exists, and investors expect to see it. But internally, our analysts don’t use it for fund selection.
And tellingly, long-term performances of the active and lazy flexi-cap funds proved just that. Essentially, buying and selling stocks more frequently doesn’t guarantee high returns; trading less doesn’t either.
So, which flexi-cap funds should you invest in?
This is where Value Research Fund Advisor comes in.
If you want a clear, research-backed, no-nonsense shortlist of flexi-cap funds — built on consistency, risk-adjusted returns, and long-term behaviour — not on unreliable metrics like turnover ratio — Fund Advisor is your best starting point.
It helps you:
- Identify the right funds for your goals
- Avoid funds that look good only on paper
- Build a portfolio that can survive multiple market cycles, not just bull runs
- Invest with confidence, not guesswork
If choosing flexi-cap funds feels overwhelming, let Fund Advisor do the heavy lifting — so you focus on investing, not decoding fund maths.
Also read: How flexi-cap funds turned 2025's volatility into gains
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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