Golden Traingle Method – Best Strategy To Select Mutual Funds

This is my Mutual fund portfolio. Iwant to continue in these funds for 15 years. Please review my funds and advise if any modifications are required.

As a Mutual Fund advisor for more than 1000 investors, I hear this pretty often from clients.

99% of them are so good at investing money and understanding the risk associated with mutual funds.But when it comes to selecting the Best Mutual Fund or creating a Portfolio, they select a fund thinking it will give good returns in the future.

The Problem I see is this: Act of Presumption (Believing that something is true without having any proof)

See, The same clients who are able to understand their risk profile so well to create wealth in the long term aren’t able to choose the best mutual funds.And it’s not their fault. It’s because of what I call “Analysis Paralysis”.If you have seen Child “Pasni Ceremony” or “Annaprasana” you will know this already.

The child is presented with many symbolic objects placed on a big plantain leaf or silver tray. And then made to choose any of the objects.If the child already knows that selecting gold or money is a good option, He/she will try to pick any one of them. But due to lack of knowledge and judgment, They make a fortuitous decision.

The same thing happens when you try to pick Mutual Funds with presumption.When you pick mutual funds without proper analysis, you might think you will get higher profits from the fund, but end up getting lower returns than peers and index.Evidence-based selection is different from an assumption-based selection, and it has the power to make you very, very wealthy.And, my wholehearted promise to you is to give to that power with The Golden Triangle.

The Magic of Golden Triangle

An Indian couple was so impressed by the fund’s performance that they decided to name their daughter ‘Mirae’ after the fund house Mirae Asset. I was stunned by hearing this news on CNBC.

Mirae asset Emerging Blue chip fund has delivered more than 25% CAGR returns in the last 10 years which is 870% returns. The fund has created 1 crore wealth in a pretty short time with an investment of just 10 lakh.

The Fund house is very small and speaks nothing about their fund yet it outperformed all other funds in the industry.

The reason for the success of this fund is because it showcased “The Golden Triangle”.

When you are dealing with Mutual funds – You already know how the fund has performed in the past and it’s easier to tell whether the fund is Good or Not.

But when it comes to investing for the future – You don’t know how well the fund will perform compared to its benchmark and its peers.

Remember this – A fund is said to be the best mutual fund if it is capable of beating its benchmark in future, Not in the past.

The biggest mistake investors make is to believe that what happened in the recent past is likely to persist.

They assume that something that was a good investment in the recent past is still a good investment. Typically less than 20% of best mutual funds in the past remain to be the best mutual funds in future.”

Hence, The Golden Triangle is about helping investors in identifying the best mutual fund by showcasing behavioral analysis of the fund. And this method helps you to achieve your goals in the fastest way without watching dozens of videos and even without any Mutual fund Advisor.

Okay, How should you use The Golden triangle to select the best mutual funds to achieve goals faster?

The Golden triangle is about understanding 3 parameters that filter the best mutual funds by avoiding the worst funds.

  1. Rolling Average
  2. Chance of beating Market
  3. Sharpe ratio

Rolling Returns

Rolling returns tell you how much Minimum and maximum returns the fund has delivered in the past. In average returns, you can only check funds mean whereas with rolling returns you can check how the fund has exactly behaved.

Chance of beating market

To be called the best mutual fund every mutual fund has to deliver better returns than its benchmark. The chance of beating the market will tell the number of outperforming days for the fund compared to its benchmark.

( Eg: if COB is 70 for a particular fund it means that fund has outperformed its benchmark in 70 out of 100 days).

Sharpe Ratio

Equity Mutual funds are volatile. Equity Mutual funds sometimes go up and sometimes go down. After researching the data for the last 28 years we found that a fund that has a higher Sharpe ratio than its Index is likely to deliver better returns in the future.

(Funds with a higher Sharpe ratio denote less risk.)

Combining these 3 parameters we have created a model with which you can filter Winning funds from the list of 450+ available equity funds.

Let me quickly give examples on how these 3 parameters will help in Picking Best Mutual funds.

 

Fund 1 : Mirae asset Emerging BlueChip fund.

 

Rolling Returns:  Mirae asset emerging bluechip fund was launched in 2010 and in 2014 it perfectly satisfied the Golden Triangle Formula.

Mirae asset emerging blue cip fund rolling retyurns golden traingle method

The maximum returns for that fund were 42.8% and the minimum returns were 1.7%. Which are pretty good compared to benchmark returns of 28.7% and -4.4%.

Chance of Beating Market:   In our Data analysis for the last 28 years we found that funds that consistently outperformed their benchmark have given the best returns in the future compared to other funds. The chance of beating the market is an excellent parameter to check the fund’s consistency.

Mirae asset emerging blue chip fund chance of beating index Golden traingle method

Between 2010 – 2014 Chance of Beating market for Mirae asset emerging Blue chip fund was 100%. Thus, Satisfies the second parameter in the Golden triangle.

Sharpe Ratio : There will be many funds having better Rolling average and good Chance of beating market w.r.to benchmark. This is where the sharpe ratio will help you in identifying best fund among dozen available funds.

Golden Traingle Method for mutual funds

After analyzing 12000 combinations of all equity mutual funds we found that funds with higher sharpe ratio among its peers and benchmark tend to deliver better returns than funds with lower sharpe ratio.

Sharpe ratio for Mirae Asset emerging blue chip fund was 1.14 and for index 0.3.

Mirae Asset emerging blue chip fund perfectly satisfied the golden triangle formula.

And the Fund has delivered 270% returns from 2015 Jan  -2020 Dec. Out performing its index by 140%.

If you have invested in Mirae asset emerging blue chip fund after satisfying “THE GOLDEN TRIANGLE” formula in 2015 In just 6 years your 10 lakh have become 27 lakhs.

2. Invesco india tax plan

Invesco india tax plan Golden Traingle Method

Rolling Returns:  Invesco india tax plan fund was launched in 2006 and in 2011 it perfectly satisfied the Golden Triangle Formula.

The average returns for that fund were 46.23% and minimum returns were 31.84%. Which are pretty good compared to benchmark returns of 42.3% and 26.49%.

Chance of Beating Market :  During our analysis in the last 14 months we found that funds selected using rolling returns and Chance of beating market have delivered 30% more returns than funds selected using average returns.

Invesco india tax plan Golden Traingle Method

Between 2007 – 2011 Chance of Beating market for Invesco india tax plan fund was 100%. Thus, Satisfied the second parameter in the Golden triangle.

Sharpe Ratio: You can be right in analysing a fund using Rolling returns and COB but if you are wrong about Sharpe ratio, And if the fund does not have a good risk reward ratio compared to its index.

Three out of 4 funds will plummet compared to the index and you will lose money and time, as many funds did from 1992-2021.

Sharpe ratio for Invesco India Tax plan was 0.13 and for 0.0 for Index between 2007-2011.

Resulting in Satisfying The Gold Triangle Method Perfectly.

And the Fund has delivered 447% returns from 2012 Jan  -2020 Dec. Out performing its index by 200%.

If you have invested in Invesco India Tax plan after satisfying “THE GOLDEN TRIANGLE” formula in 2012 In just 9 years your 10 lakh has become 44 lakhs.

3.Canara Robeco Flexi cap Fund

 

Rolling Returns:  Canara Robeco Flexi cap Fund was launched in 2003 and it took 7 years from inception to form The Golden Triangle Formula.

 The maximum returns for Canara robeco flexi cap fund in 2010 were 22.56% and minimum returns were -11.3%. Which are pretty good compared to benchmark returns of 6.95% and -9.47%.

Canara robeco flexicap golden traingle method

Chance of Beating Market:  On our journey of creating a blueprint to select the best mutual funds we found that Chance of beating the market should be at least 50%.

In  2010 Chance of Beating market for Canara Robeco Flexi cap Fund was 89.8%. Thus, Satisfied the second parameter in the Golden traingle.

Canara robeco flexicap golden traingle method

Sharpe Ratio: Sharpe ratio for Canara Robeco Flexi cap Fund was 0.394 and 0.326 for Index in 2010. Resulting in Satisfying The Gold Triangle Method Perfectly.

And the Fund has delivered 375% returns from 2011 Jan -2020 Dec. Outperforming its index by 130%.

If you have invested in Canara Robeco Flexi cap Fund after satisfying “THE GOLDEN TRIANGLE” formula in 2011 In just 10 years your 10 lakh has become 37.5 lakhs.

The returns of your Mutual fund will be directly proportional to the strength of your Research.

You invest in Mutual funds so that you can earn better returns than the benchmark in the long term to achieve your goals by paying fees to the fund house.

I have seen Advisors and Distributors suggesting funds that were winners in the past. Many funds which are best in the past have struggled to give better returns than benchmark. Nippon India Growth fund, Hdfc flexi cap fund,Aditya brila frontline equity fund, Sbi blue chip fund, etc are not better funs today.

The number of returns you get in Mutual funds and how fast you achieve your goal will directly depend on how well you can research and select a fund.

And there’s nothing more powerful on Planet Earth than data. In today’s time data is king and the one who uses it perfectly will rule his world. And, With The Golden triangle, You know how to use the data to select winning Mutual funds.

The reason Golden Triangle worked is that it captures most of the risk reward performance of the Fund. It talks about how you can select Winning Mutual funds Without any Advisor or Distributor.

Conclusion:

The Golden Triangle has helped More than 1000 investors to invest in Winning Mutual funds and to master the skill of selecting the best mutual fund without any advisors. Let’s pick more best funds in the future with the Golden triangle formula to have a financially rich lifestyle.

For analysis, we have used regular funds because direct mutual funds were only launched in 2013. However, in our advisory services, we recommend only direct funds.

If you want to earn higher returns than the index every year at a low cost, you can subscribe to our model portfolios.

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