Why "best fund" lists age badly by the time you read them
Every January, the "best funds of the year" lists arrive. Magazines, websites, YouTube channels, WhatsApp forwards — everybody has a list. And by the time you read it, the information is already stale.
Here is why. A fund that topped the charts last year did so because of a particular set of market conditions — a sector tailwind, a style rotation, a macro trend. The fund manager rode that wave well. But the wave has already happened. Buying the fund now is not buying the wave. It is buying the fund after the wave — at a time when conditions may be shifting to favour a completely different style.
Research consistently shows that last year's top-performing funds are not reliably next year's top performers. There is a term for this — performance chasing — and it is one of the most expensive behavioural patterns in retail investing. A family buys a fund because it returned thirty-five percent last year, holds it for a year in which it returns eight percent, feels disappointed, sells, and buys next year's topper. Repeat annually. The family's actual return is significantly lower than any individual fund's long-term return — because the family was always one cycle behind.
The alternative is boring and effective. Choose a well-diversified fund that fits your asset allocation need. Invest through SIPs. Do not compare it to the topper every January. Compare it to its benchmark over three-to-five-year rolling periods. If it is doing its job — delivering benchmark-like or slightly better returns with acceptable volatility — leave it alone.
The best fund for your family is not the one that topped last year's chart. It is the one you can stay invested in for fifteen years without losing sleep. That fund will never make a "best of" list. And it does not need to.
We would rather you own less and understand more than the reverse. Use notes like this to ask better questions — not to shortcut diligence. Scheme documents, costs, and your own goals still come first. Written for general education — not as individual investment, tax, or legal advice.