How to compare your mutual fund schemes?

Nikhil Desai

Many a times mutual fund investors get confused while taking their investment decisions. The wide range of funds on offer provide many choices and its very difficult task to evaluate each of them and compare them against each other. To simplify this, here are some of basic things that should be followed by investors while comparing mutual funds.

Check the fund house and fund manager

While comparing funds, the first thing that should be considered is fund house and fund manager. Many a times, investors just follow the scheme name and then get disappointed with the returns. So while comparing the funds, the basic thing to be checked is the fund house and fund manager. The fund houses which have a demonstrated track record of performance and schemes that have fund managers with a higher tenure should be preferred.

Fund Objective and Investment Objectives

While comparing the funds second and most important thing is the alignment of objectives. That is the investor should check the funds philosophy and objective and also his own investment objective. Both should be similar or closely match. Moreover, the funds philosophy and objective also determines the potential of the scheme to perform in different market conditions.

Charges and Fees

Investor should be aware of the charges and fees involved in the investment. So, the investor should compare the expense ratios and exit loads while investing. A lower expense ratio maximises returns.

Holdings/portfolio

The portfolio constituents and their weightage is also important for arriving at an investment decisions. The portfolio concentration can be determined through this so investor are advised to compare the portfolio of the schemes.

Ratio Analysis

Ratios like Sharpe Ratio, R-squared, Beta explain the efficiency of fund managers and the holdings of the scheme. To know the risks associated with the schemes, investors should check the ratios of the scheme.

With all these aspects in mind, investors can compare the mutual funds and can arrive at a proper decision for the investment.

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