Why the headline number misleads
Most of what your equity fund earns is not the manager's doing. When Indian equities rise, almost every equity fund rises, because they all hold Indian equities. The market does the heavy lifting; the manager's contribution is the slice above or below what everyone else got.
This is why a fund advertising a spectacular three-year return often turns out to be an ordinary fund in a category that had a spectacular three years. Small-cap funds looked like genius in 2021 and looked like recklessness in 2018. The funds barely changed.
Compare like with like
SEBI's categorisation, introduced in 2018, exists exactly for this. Every scheme must declare which category it belongs to — large cap, mid cap, flexi cap, corporate bond, and so on — and stick to the mandate. That makes a fair comparison possible.
Comparing a small-cap fund to a large-cap one tells you nothing about either manager. It tells you which segment of the market did better. Compare a fund only to the other funds in its own category, over the same window.
Two questions worth more than the return
Where does it sit within its category? Being ahead of the category median over five years is meaningful. Being ahead over six months is close to random.
Is it consistent, or was it one good year? A fund that beat its peers in four years out of five is telling you something different from one that trailed for four years and then had a spectacular fifth. The average of both can look identical.
This is why rolling returns matter more than a single trailing figure. A five-year CAGR quoted today depends heavily on what the market happened to be doing five years ago. Rolling windows ask the same question repeatedly across many start dates, which strips out that luck.
Where the honest answer runs out
Even a fund that has genuinely beaten its category may have done so through one concentrated bet that happened to work, or under a manager who has since left. Past performance measures what already happened; it is evidence, not a prediction. Anyone who tells you a track record guarantees the next five years is selling something.
On this site, every scheme page shows the fund's return alongside its category, computed from AMFI's published NAV history rather than reproduced from a factsheet — so the comparison is like-for-like and you can see the gap for yourself.
What to take away
- A return figure means nothing without its category's return beside it.
- Compare within a SEBI category, never across categories.
- Consistency across periods beats one exceptional year.
- Even a real edge is evidence about the past, not a promise about the future.