Parameters to Compare Mutual Funds

How do you decide to buy an outfit? You would decide in terms of brand, fit, cost, etc. If selecting an outfit takes so much effort, how much more effort should one put in when it is a question of our…

How do you decide to buy an outfit? You would decide in terms of brand, fit, cost, etc. If selecting an outfit takes so much effort, how much more effort should one put in when it is a question of our investments? It is essential that you monitor your investments in such a way that it leads to take informed decisions.

Let’s understand the parameters to assess when investing in mutual funds in India.

Risk profile: The first step is to know yourself, understand your risk appetite, how you intend achieving your financial goals and then decide your investment. Keep in mind that income from mutual fund returns in India are taxable in the hands of the investor.

If you prefer diversified investment you may consider to invest in a hybrid fund. If you are looking for short term investment, you can consider to invest in a debt fund. However, if you aim at building your wealth over long term and are willing to take risks, you can consider to invest in equities.

Mutual fund Returns Comparison:

Past performance is no guarantee to future mutual fund returns; however, do evaluate the performance of a mutual fund on consistency parameters to determine the type of fund.

You can evaluate the performance of a mutual fund against its benchmark via the fund factsheet.

Studying the fund’s quartile ranking is also useful to find a scheme.

For mutual funds returns comparison; funds with the highest mutual fund returns in the particular period are placed in the top quartile, whereas the lowest mutual fund returns are placed in the bottom quartile. If a fund has figured in the top quartile for 4-6 quarters consistently it means that the fund is outperforming its peers.

You can use a  investments return calculator to calculate the amount of estimated  mutual fund returns for specific investment periods.

Portfolio allocation:

While comparing mutual funds, study where and how much the mutual fund invests in any asset/sector/stock to evaluate if the mutual fund is adequately diversified. For this, study the fund’s   portfolio

Expense Ratio

 Scheme’s expense ratio is another parameter to compare mutual funds. Asset management companies levy asset management fees for handling your investments. This affects the performance or mutual fund returns provided by a fund as it factors in the expense ratio. With other parameters remaining same, you can consider to choose funds with lower expense ratio. You should also look into the exit load levied on the scheme before you redeem it.

So you are now ready to understand ‘what’ and ‘how to’ go about comparing mutual funds. If you are a prospective investor an investment returns calculator helps you in your financial planning based on the estimated investment  returns.

However, if you are still hesitating, either reach out to an AMC or consult a financial advisor to help you build a right mutual fund portfolio.

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader.

Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader.

The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date.

Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data/information / views provided in the Article/video.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.


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