I am a long-term high-risk investor with SIPs in Aditya Birla ELSS, SBI Blue Chip and SBI Small Cap funds. After going through recent data that about 50% of actively managed large-cap funds have failed to beat the index, I am looking at buying SIPs in exchange-traded funds (ETFs) and index funds for 4-5 years. Can you suggest one or two high-performing ETFs and index funds?
—K. Routray
It is true that large-cap funds, on an average, have struggled to beat their benchmark indices for the recent one-year period. As I write this, the Nifty 50 index has outperformed the average large-cap funds’ returns by 1.3% in the last one year (point-to-point returns). However, if you look at even slightly longer term returns, you will find actively managed funds, on an average, doing better than the indices, with better managed funds (above-average funds) doing significantly better. For the last 3-, 5-, and 10-year periods, actively managed funds have outdone the benchmark index by 1.2-2%. Of course, one could make the argument that the extra fund management risk assumed by investing in an actively managed fund is not commensurate with this margin of out-performance. It is a judgement call that investors and advisors across the country are taking differently depending on their outlook of the market.
