Understand Your Mutual Fund More With the MF Fact Sheet

The Mutual Fund Fact Sheet is a statement that gives a monthly review of the MF scheme across various performance parameters. You can get a lot of useful information from the Mutual Fund Fact Sheet to understand the scheme's performance.

Let us see the key nuggets of information present in the Fact Sheet that can help evaluate MF performance -

1) Portfolio Holdings

Check the portfolio holdings to see which sectors and which securities the MF is invested in. You can check the extent of diversification and if the fund holdings satisfy the investment objective. If it is a equity fund, you can make out if there are investments in very volatile stocks and the extent of mid-cap and small-cap exposure. Check if there are many securities that are vulnerable to macro economic factors.

2) Portfolio Turnover Ratio

          Portfolio Turnover Ratio = Amount of sales or purchases / Net assets of the fund.

A high ratio indicates a higher portfolio churn. This means higher costs and therefore lower returns.

3) Beta

It measures the volatility of the fund against the volatility of the market. If beta is higher than 1, the fund is more volatile than the market which means greater risk. If the beta is consistently more than 1 and you are a conservative investor, you might want to rethink your allocation to this fund.

4) Sharpe Ratio

The Sharpe ratio calculates the risk adjusted returns of the mutual fund. It is the returns in excess of the risk-free returns divided by the standard deviation of the excess return. A higher Sharpe ratio means the returns are attractive. It is useful to compare Sharpe ratio of a fund before and after significant changes in the portfolio.

5) Performance

We can look at the past performance of the Mutual fund. Though past performance is not a guarantee for future returns, it gives an idea of the fund managers' effectiveness, the performance against the benchmark, long-term and short-term returns and how it fares when there is volatility.

6) Rating

In case of debt funds, you can check the ratings of the securities that they are invested in to get an idea of the quality of the portfolio.

7) Benchmark Index

All Mutual Fund Schemes have a benchmark. It can be the BSE 100 or NIFTY 50. They give a reference as to how the schemes have performed compared to similar schemes and the market. If the benchmark has returned 15% over the year and the MF Scheme has returned only 12%, the MF scheme has underperformed. If the MF Scheme returned 18%, it has outperformed the benchmark.

Here are some examples of MF Schemes and their benchmarks -

MF Scheme	Benchmark
Aditya Birla Sun Life Equity Fund	S&P BSE 200 Index
SBI Banking & Financial Services Fund	NIFTY Financial Services Total Return
ICICI Prudential Advisor Series-Debt Management Fund	CRISIL Liquid Fund Index

Rather than investing based on tips or articles on top performing funds, look through the fact sheet to make a more informed investing decision. You can go through the MF Fact Sheet with your professional financial planner to decide the best course of action.