According to Anand Rathi Wealth Joint CEO Feroze Azeez, data from 2018 to 2025 reveals that only 2% of index funds managed to outperform the Nifty 50. However, when examining factor-based index funds such as momentum, quality and low volatility funds, more than half of these funds have outperformed Nifty 50 from 2023 to 2025. Azeez emphasizes that this performance gap demonstrates how active management provides much higher returns to investors through alpha generation, making diversified equity mutual funds more suitable for long-term wealth creation.
According to The Economic Times analysis, investors often believe adding more mutual funds means better diversification, but too many funds can actually create duplication and reduce efficiency. Expert Samir Shah, Founder of Investa Financial, recommends limiting portfolios to 4-5 high-quality schemes for specific goals. In the case of a portfolio with 15 funds, Shah points out that multiple large cap, mid cap, and large & midcap funds together may have as much as 45-50% overlap in underlying stocks. The optimal strategy involves 55% in large caps and the rest in mid and small caps, helping portfolios participate in different phases of the market cycle while avoiding concentration risk.
According to the analysis, investors who experienced negative returns for their SIPs in the first year saw their investments turn positive with returns ranging between 17-21% if they stayed invested for the next 4 years. Azeez highlights that long-term wealth creation requires staying consistent and disciplined through market falls rather than timing the market. The data demonstrates that patience is crucial during flat market phases, as investors who abandon SIPs during corrections often miss the eventual recovery.
As reported by Anand Rathi Wealth, the broader market is expected to outperform large caps with mid-caps delivering earnings growth of nearly 18% and small-caps closer to 20% this financial year. The Nifty 50 is currently trading below its estimated fair value by nearly 10%, suggesting valuations remain fairly comfortable. Azeez notes that domestic institutional investors continue supporting the market through strong domestic participation, making the domestic growth story constructive over the next 12 to 18 months despite rotating market leadership.
According to the expert analysis, investors with long-term horizons should allocate 80% to equity as the core growth driver, with the rest in debt for stability. For investors earning ₹1 lakh monthly, the recommended allocation includes 80% equity, 20% debt for long-term horizons, 70% equity, 30% debt for medium-term investors, and 100% debt for short-term horizons under one year. Azeez emphasizes avoiding recency bias and comparing investments using the same measures like CAGR for fair assessment, while noting that equity has delivered the strongest 3-year rolling returns with a Sharpe ratio of 0.47 compared to gold and silver at 0.36 and 0.20 respectively.
