Mutual Funds with Low Standard Deviation

Mutual Funds with Low Standard Deviation


What is Standard Deviation in Mutual Funds? Lets have a look at few Low Standard Deviation Mutual Funds.

How does Deviation or SD is a measurement tool used in statistics that shows how much variation there is from the arithmetic mean or average. In investments, it is used to describe the volatility of past mutual fund returns and thereby to understand the risks associated with a particular fund. It measures the spread of a Mutual Fund return or its dispersion from the mean. A greater standard deviation shows higher volatility which in turn implies that the mutual fund’s performance went high above the average but also plummeted significantly below it. On the other hand, a mutual fund with a long track record of consistent returns will display a low standard deviation.

For an investor Standard Deviation denotes the risk involved in that particular scheme or investment. It is important to understand how to use Standard Deviation. Let us look at an example –

Scheme A – Average Return of 10% & Standard Deviation of 12%

Scheme B – Average Return of 20% & Standard Deviation of 14%

Higher volatility does not necessarily mean the scheme is bad. It has to be seen along with the average returns. In the above example though Scheme B has higher volatility the range of returns of Scheme A are 10-12 = -2% and 10+12 = 22%. So scheme A can give negative returns also. The range of returns for Scheme B are 20-14 = 6% and 20+14=34%

Investors who do not prefer to see high volatility in the scheme returns are better off looking at schemes that have a lower standard deviation.

Let us look at mutual funds from each category. Funds have been selected based on the lowest standard deviation in its category and based on the highest returns over 3 year period.

Scheme NameAMC Name3 Year CAGR Returns3 years Volatility
JM LargecapLarge Cap8.7410.38
Canara Robeco BluechipLarge Cap14.8519.25
Axis MidcapMidcap15.9220.08
PGIM India Midcap OppMidcap17.1926.04
Quant ActiveMultiCap22.823.99
BNP Paribas MulticapMultiCap8.9821.23
ICICI Pru Value DiscoveryValue11.1319.93
Kotak India Equity ContraValue11.4522.3
Axis Small CapSmall Cap17.7424.46
Quant Small CapSmall Cap23.9631.02
IDBI Equity AdvantageELSS4.8818.81
Quant TaxELSS24.0224.25

(All schemes are Regular Plan Growth Option, Source: Value Research – Data as on – 4 May 2021)

As one can see from the above table the schemes with the lowest standard deviation does not give the best returns. So standard deviation should be seen along with the returns generated by the scheme. Standard Deviation also varies greatly as per the category of the scheme.

To know what funds are suitable for your risk profile contact us.

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