Consistent mutual funds or stocks tend to have a history of stable and consistent returns, which can help investors achieve their long-term investment goals. They also tend to have lower volatility, which means that their returns are less affected by market fluctuations. This can help investors manage risk and reduce their chances of losing money. Peace of mind is of high importance for any long-term investor.
These are also better for long-term investments and better suited for SIPs (Systematic Investment Plans) and STPs (Systematic Transfer Plans) as they tend to have stable and consistent returns which can help investors achieve their long-term investment goals through consistent investments.
However consistency doesn’t guarantee that the mutual fund or stock will always perform well, but it is an important factor to consider when building a well-diversified portfolio. One must consult a good SEBI-registered investment advisor or an expert before making any investment decisions.
There are several tools that can be used to find consistent performers when it comes to investing.
One of the most commonly used tools is rolling returns, which measure a mutual fund’s or stock’s performance over a specific time period. They are calculated by looking at the returns over a series of overlapping time periods. One can take the long-term average of a series of such sequential periods. Rolling returns can be a good way to find consistent performers as they take into account short-term fluctuations and provide a more accurate representation of the fund or stock’s long-term performance. Additionally, investors can use rolling returns to compare the performance of different funds or stocks and make more informed investment decisions.
Another tool is using the Sharpe ratio which calculates a fund’s returns compared to the risk it took to generate those returns. It is used as a measure of risk-adjusted returns, and a higher Sharpe ratio indicates that a fund has generated higher returns for the amount of risk it has taken.
Yet another way to measure risk-adjusted returns is by using the Treynor ratio, which measures a fund’s returns in relation to the market risk it took. It is calculated by dividing the fund’s excess returns over the risk-free rate by the fund’s beta (systematic risk). A higher Treynor ratio indicates that a fund has generated higher returns for the amount of market risk it has taken.
When selecting consistent stock portfolios, or funds, there are several key points to consider:
It’s important to note that past performance is not indicative of future returns, and investors should do thorough research and analysis before making any investment decisions. Additionally, it’s always a good idea to consult a financial advisor or an expert before making any investment decisions.
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