How to Beat Mutual funds Returns?

Mutual funds sahi hai, but let’s be honest—they can feel a bit boring, especially in a bull market. When stocks are soaring, and you hear about people making double or triple returns, it’s tempting to think, “Why am I stuck with these mutual funds? I should be investing directly in stocks!” and this is what most Investors are doing these days.
Below are the mutual funds ‘category average’ returns that are frowned upon in the rising markets. Even 40%+ kinds of returns look less when you screen how the Individual stocks have performed in the index. (Read more | Investor Beware: 5 Costly Mistakes to Evade in a Rising Stock Market)
Source:valueresearchonline.com
And It’s natural to look at the top-performing stocks only. If you look at the top 10 stock performers of nifty in the last year, you may feel what if you had invested your money in those stocks rather than Mutual funds or even the index for that matter. 
Source: Equitymaster.com
In these times, you may also be pitched different high-paying strategies by Stock Advisors, PMS sellers, Small cases, etc. to get you higher returns than the Index, and Outsmart the Fund Managers. All are Genius.
The Temptation of Stock Picking
Everyone wants to pick the next big stock—the one that’ll make them rich overnight. And why not? It’s so easy these days with so much FREE information available, so many Finfluencers telling you what to do, and you can also do your “own research”, with the data available. 
But before you get carried away with your newfound stock-picking skills, let’s talk about why mutual funds don’t perform like your dream portfolio in a bull market. The villain here? Diversification. (Explore | How many Investment Products should you have in your Portfolio?)
Yes, those fund managers are obsessed with diversification. Instead of putting all your money in a few “winning” stocks as you would, they spread it across a wide range of companies. Why? To manage risk. And they call it one of their USPs. But let’s be honest, when you’re chasing those big returns, who cares about managing risk, right?
If you had known that Bharti Airtel was going to be the winner, you would have invested the full money into that stock and made a killing in the investment market. You are always ready to take the concentrated risk. 
But the question would be When to Enter and Exit. Like in the below price chart of Bharti only you could see how the stock has performed in the past years. From 2007 to 2021, returns were almost ZERO.
Source: Moneycontrol.com
And this again is one of the reasons, you have stopped trusting Mutual funds, as you expected the Fund managers to know the “Right Time to enter and exit” and even they are not doing their job well. 
So now you have decided to do it on your own.
The Mistake Many Make
But Reality is a bit different, and Here’s where things go wrong. You hear about a few stocks that performed well, and you buy them. Then you hear about more stocks, and before you know it, you’ve got a portfolio full of random stocks—ones you’ve picked based on tips, trends, or what everyone else is doing.
What happens next? Your portfolio ends up looking a lot like the index but without the benefit of professional management. The result? Your returns are often similar or worse than the mutual fund you were trying to beat. (Read | Why Simple is Better: Understanding Complexity Bias)
But you never stop, in the quest of generating high returns, and finding multibaggers, you keep trying. 
How to Beat Mutual Funds
Now, if you’re still up for the challenge, let me walk you through what it takes to pick stocks that can (hopefully) do better than mutual funds.

Fundamental Analysis: You need to go through the company’s financial health by studying income statements, balance sheets, and cash flow. Don’t forget to check important ratios like the PE ratio, PB ratio, and Price-to-Sales. These will help you understand whether a stock is overpriced or underpriced.
Profitability and Growth: Look at things like gross margins, operating margins, return on equity, and earnings per share. Also, keep an eye on revenue growth, sales, and debt levels.
Management and Competition: Read the company’s annual reports, and get a sense of the management’s vision. Does the company have a competitive edge? This is crucial for long-term growth.
Technical Analysis: If you prefer to play the stock market based on price movements, you can dive into technical analysis. This includes studying price charts, trends, and market indicators to figure out when to buy and sell.

Also, you’ll need to keep track of quarterly earnings, market sentiment, and constantly re-evaluate your analysis. Sounds simple, right?
Or… Stick to the Experts
If all this seems overwhelming, maybe it’s worth trusting the professionals. Mutual fund managers have research teams dedicated to doing all this work. Sure, they may not always deliver the highest returns, but their job is to manage risk and control losses, giving you a smoother ride. And sometimes, that’s exactly what you need. (Read | Asset Allocation Strategies: How to Balance Risk and Reward in Your Portfolio)
So, if you’re ready to spend all your free time analyzing balance sheets, tracking market trends, and perfectly timing your buy-and-sell decisions, go ahead—beat those mutual funds! But don’t be surprised if, after all that effort, you find yourself wishing you’d stuck with those “boring” mutual funds that, for some strange reason, seem to do the job just fine without all the drama.
And let’s not forget, mutual funds aren’t slow—they’re well-managed. They follow a set strategy based on the fund’s objective, and while their returns may seem unimpressive during bullish times, they are designed for the long haul. 
When it comes to wealth generation, those steady, average returns over time are what really do the trick. It’s not always about beating the market today—it’s about growing your wealth consistently over the years. After all, slow and steady often wins the race.
(Learn More | How to Avoid Mutual fund overlap and maintain a Diversified Portfolio)
(Explore | A Tale of a Confused Investor | From Fund Selection to Professional Advice)