If you are investing in mutual funds over the medium to long term, you will probably want to analyze and invest in the funds that perform best. Conversely, no one is interested in the worst performing mutual fund. What would you do if the fund you invested in became one of the worst-performing mutual funds? In this article, we will introduce you to the 10 worst-performing mutual funds over the past 10 years from 2013 to 2023. and analyze some interesting facts about them.
Also read: 10 large-cap funds with the highest returns over the past five years
How did we filter these worst-performing mutual funds between 2013 and 2023?
I applied a simple filter based on the following criteria:
- We consider all equity mutual funds except sector funds. The reason for excluding sector mutual funds is that some sectors are cyclical in nature and financial advisors typically also recommend fewer sector funds to investors.
- Excludes exchange traded funds (ETFs).
- It is clear that this filter was used for funds that have been in existence for more than 10 years.
- Returns are from the mutual fund’s direct plan.
10 Worst Performing Mutual Funds of the Past 10 Years (2013-2023)
Here are the top 10 worst-performing stock funds over the past decade. For reference, annualized returns over 3, 5, and 10 years are also shown.
| funds | 3-year profit rate (%) | 5 year profit rate (%) | 10 year return (%) |
|---|---|---|---|
| Taurus Flexi Cap Fund | 17.67 | 12.15 | 11.74 |
| Taurus Large Cap Fund | 15.29 | 12.32 | 12 |
| Sundaram Nifty 100 Equal Weight Fund | 19.93 | 15.62 | 12.53 |
| LIC MF S&P BSE Sensex Index Plan | 16.16 | 15.19 | 13.25 |
| Aditya Birla Sun Life Nifty 50 Index Fund | March 17th | 15.16 | 13.26 |
| DSP Top 100 Equity Fund | 16.92 | 14.37 | 13.26 |
| Franklin India NSE Nifty 50 Index | 16.93 | May 15th | 13.43 |
| LIC MF Nifty 50 Index Plan | 16.89 | 15.23 | 13.45 |
| Japan India Index Fund – S&P BSE Sensex Plan | 16.39 | 15.42 | 13.53 |
| SBI Nifty Index Fund | 17.17 | 15.26 | 13.56 |
Interesting facts about these worst-performing funds
#1 – Even the worst-performing funds generate returns of 12% or more over the long term.
- Returns for all equity funds ranged from 11.7% to 30%, while returns for the 10 worst performing funds over the past decade ranged from 11.7% to 13.5% annually.
- With the exception of one fund, all the other worst-performing funds still produced returns of 12% or more over the long term.
- Some would argue that such returns could be even higher since the stock market is currently at its peak, and that may be true.
- However, in any case, such a bull market is expected in the medium to long term.
What we learned: You don’t have to worry too much about chasing a particular fund. You need to continue investing for the long term. Even if the fund performs poorly, you can still aim for returns of 12% or more per year over the long term.
#2 – Investing too much in one AMC can reduce your overall profits
- There are two AMCs (LIC MF and Taurus MF) each with two funds in the worst performing list.
- As I mentioned earlier, Worst performing Axis Mutual Fund.
- Even many investors were affected. The Franklin Bond Fund debacle.
- Too much exposure to a particular AMC fund can negatively impact your portfolio over the long term compared to peer funds.
What we learned: As I said several times earlier, don’t invest a lot of money in a single AMC mutual fund. Investors should also diversify across AMCs. A decline in the performance of funds based on AMC should not affect the returns of the mutual fund portfolio.
#3 – Invest in low-cost Sensex index funds / Nifty 50 index funds.
If we consider the entire universe of Sensex Index Funds (investing in 30 BSE stocks), the returns over the last 10 years have ranged from 13.2% to 13.8%.
This list of worst performing funds includes two Sensex funds with returns of 13.2% and 13.5%. There may be tracking errors and expense ratio differences between these Sensex funds, resulting in some variation in returns.
Similarly, even in Nifty 50 index funds, there is some variation among all the funds.
What we learned: Investors don’t have to chase a good index fund because they invest in more or less the same stocks in the Indie Ring index, but consider index funds that have lower expense ratios beyond tracking error.
#4 – Index fund returns are lower, but still better
- If we observe, 7 out of the worst 10 funds belong to sensex/nifty index fund category.
- Index funds replicate the returns of a specific index, excluding tracking error and expense ratios.
- Other than these 10 poor performers, the entire category of sensex index funds or nifty 50 index funds generated returns between 13% and 13.8%.
What we learned: Investors who don’t feel comfortable investing in active funds can choose index funds, which are a surefire way to make money over the long term. Such an investor could have generated returns of over 12% in the long run even by investing in such a bad mutual fund.
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#5 – Short-term performance doesn’t count.
These funds have been among the worst performers of all equity funds over the past decade. However, due to the bull market, it has delivered an impressive performance of 15% to 17% per year over the past three years and 12% to 14.5% per year over the past five years.
What we learned: Don’t chase short-term performance. This performance was mainly due to the stock market peaking in recent months.
Final conclusion on the worst performing funds
- Don’t try to time the market. Continue medium- to long-term investments.
- If you’re new to active funds, choose an index fund that will still give you a return of 12% or more.
- Avoid overexposure to certain AMCs.
- Even if you invest in the worst-performing fund, you can still aim for a 12% annual return over the long term, but it’s not guaranteed.
Suresh KP is the founder of Myinvestmentideas. He is a NISM Certified Investment Advisor and he is a NISM Certified Research Analyst. He has been analyzing financial markets for the past 20 years. He can be reached at suresh@myinvestmentideas.com.
