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Stock Analysis, IPO, Mutual Funds, Bonds & More

How to track the performance of your mutual fund

Looking at the standalone performance of a scheme will not help you answer the queries. Here are a few pointers that would help you to overcome this trouble.

, ET Online|
Updated: Oct 24, 2016, 08.32 PM IST
ET Online
How do you know whether your mutual fund scheme is offering you good returns? Sure, it gave you double-digit returns last year. But is it really good enough? No clue, right? Looking at the standalone performance of a scheme will not help you answer that query. Well, it is a common dilemma faced by many mutual fund investors.

Here are a few pointers that would help you to overcome this trouble.

Scheme vs benchmark

Every mutual fund scheme is mandated to have a benchmark. You should always compare the performance of a scheme against its benchmark. Comparing the performance of your scheme with its benchmark would give you a better idea about the performance of the scheme. If the scheme has managed to beat its benchmark, it shows that the fund has done well. If it has managed to beat the benchmark by a big margin, it shows that the fund manager has very good stock-picking skills.

Scheme vs category

The mutual fund scheme has outperformed its benchmarks. But is that good enough? Not necessarily. You should then proceed to compare its performance with its category. You can look at category average returns to find out whether your fund is an above average performer. You can also compare its performance with some established peers to figure out its standing in the category.

Look at the portfolio

Sure, the fund is an above average performer within the category. But is it bankable? You can proceed to take a look at its portfolio to find out the answer. Take a close look at the stocks in its portfolio. Are they in line with the mandate of the fund? Does the stock portfolio match your risk profile you had in mind?

Checking ratios

You can take a look at the important ratios of the fund. Mutual fund experts mostly follow ratios like standard deviation, sharpe ratio, Sortino, mean, alpha, beta, etc. You can learn the basic function of these ratios and compare the ratios of a scheme with its peers to find out where the scheme stands vis-a-vis the peers.

“Be sure not to over review your portfolio,” says Vidya Bala, Head-MF Research, FundsIndia. Reviewing your mutual fund scheme too often might land you up with wrong decisions on short term fluctuations. You should review the portfolio once in six months or in a year.
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