Consistency vs High Returns – What to Prioritize?

Introduction

Investors often chase the top-performing fund, only to see it underperform later. The smarter path is choosing funds that deliver steady returns across cycles.

Consistency may not feel exciting, but over time, it’s usually more rewarding than chasing peaks. Let’s break this down with metrics and a relatable example.

Why Consistency Matters More Than Occasional Outperformance

1. Avoids Heartburn
   Wildly swinging NAVs cause panic and poor decisions.
2. Compounds Better
   Steady 11% year-on-year beats one-time 20% followed by 2%.
3. Behavioural Advantage
   Consistent funds reduce investor anxiety and help maintain SIP discipline.

Key Metrics to Evaluate Consistency

• Rolling Returns (3-5 years)
• Downside Capture Ratio
• Return Consistency Quartile Rankings
• Standard Deviation & Sharpe Ratio

• Dev picked a fund that had delivered 20% in 2020 and 4% in 2021 — then lost 8% in 2022.
• Aarti chose a fund that gave 11–12% steadily every year.

Conclusion

High returns can be flashy, but consistency keeps you invested — and that’s the real compounding superpower. 

Before choosing a “hot” fund, check how consistent it has been over time. Choose peace of mind over adrenaline.

Summary Table: High Returns vs Consistency