Psu Mutual Funds To Invest In December 2024

Best banking & PSU Mutual Funds to invest in December 2024

Best Banking & PSU Funds to Invest in December 2024

If you’re looking to invest in Banking & PSU Debt Funds this December, several schemes stand out for their solid performance and risk management. Here are the top funds to consider:

  • Bandhan Banking & PSU Debt Fund
  • Axis Banking & PSU Debt Fund
  • Aditya Birla Sun Life Banking & PSU Debt Fund
  • DSP Banking & PSU Debt Fund
  • Kotak Banking & PSU Debt Fund

These funds have been shortlisted using a careful methodology that evaluates their performance based on various key factors. Let’s dive into the approach ETMutualFunds used to select these funds.

Methodology for Shortlisting the Best Funds

ETMutualFunds employs four primary criteria to evaluate Banking & PSU Debt Funds:

1. Mean Rolling Returns

  • To assess the consistent performance of these funds, mean rolling returns are calculated daily over the last three years. This approach helps capture how well a fund has performed over different time periods, providing a clearer picture of its long-term performance.

2. Consistency in the Last Three Years (Hurst Exponent)

  • The Hurst Exponent (H) measures the consistency of a fund’s performance and how predictable its NAV (Net Asset Value) is over time. A higher H value indicates a more consistent and less volatile fund. Here’s how to interpret the Hurst Exponent:
    • H = 0.5: The fund’s returns are considered random, resembling a geometric Brownian motion, and are difficult to predict.
    • H < 0.5: The returns are mean-reverting, meaning they tend to move back towards their average over time, indicating higher volatility.
    • H > 0.5: This means the returns are persistent, showing a stronger trend. The larger the value of H, the more predictable and stable the fund’s returns are.

Funds with higher H values tend to have lower volatility, making them more stable for long-term investors.

3. Downside Risk

  • Downside risk focuses on how well a fund protects itself during periods of negative returns. To calculate this, only the negative returns of the fund are considered:
    • X = Returns below zero
    • Y = Sum of the squares of those negative returns
    • Z = Average of Y over the number of days observed
    • Downside Risk = Square root of Z
  • Funds with lower downside risk are preferred, as they are better at limiting losses during downturns in the market.

4. Outperformance

  • Outperformance is calculated by subtracting the benchmark return from the fund’s return. This helps assess whether the fund consistently beats its benchmark over time. The rolling returns are used for this calculation, rolled daily, to ensure the fund is continually outperforming its target index.

Why Invest in Banking & PSU Debt Funds?

Banking & PSU Debt Funds are a great option for conservative investors seeking stable returns. These funds primarily invest in debt securities issued by banks and public sector companies, which tend to be less risky compared to other sectors. While they generally provide more predictable returns, investing in these funds can still offer significant opportunities for growth.

  • Lower Volatility: Funds with higher Hurst Exponent (H > 0.5) show consistent trends in returns, which typically means less volatility and more stability.
  • Downside Protection: These funds are designed to protect your investment, especially in tough market conditions, with a lower downside risk.
  • Consistent Outperformance: By choosing funds that outperform their benchmarks, you can be confident that you’re making an investment that provides competitive returns over time.

For investors looking for moderate risk and steady income, Banking & PSU Debt Funds offer a reliable investment avenue. With funds like Bandhan Banking & PSU Debt Fund, Axis Banking & PSU Debt Fund, and others, you can enjoy the benefits of investing in well-managed debt portfolios that focus on safety, consistency, and long-term growth.

These funds are a solid choice for December 2024, especially for those aiming to balance returns with lower risk exposure.

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