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Mutual Fund Fact sheet

Make Sense of Mutual Funds: Reading the Fact Sheet

Introduction

You often bet on a cricketer or a team in your friend circle when a big tournament occurs. Even though you may be placing a bet of just ₹50 or ₹100, you do a lot of homework – track his performance by looking at the average or strike rate. You even understand how to calculate the strike rate or average. If you do so much groundwork for just ₹50 or ₹100, imagine what you should do before investing a few thousand rupees in a mutual fund! However, you may ask how to track a mutual fund’s performance. This is where the Mutual Fund Fact Sheet comes into play—a handy document that provides a snapshot of a scheme’s key details and performance metrics.

Understanding the Mutual Fund Fact Sheet

A Mutual Fund Fact Sheet is a brief, typically one-page document that offers an overview of a particular mutual fund scheme. It’s like a report card highlighting the scheme’s health, performance, and other essential details. Each mutual fund house publishes this document monthly so that investors can regularly assess the status of their investments. Understand our top mutual fund recommendations with Standard Chartered Fund Select

Decoding the Mutual Fund Fact Sheet

A Fact Sheet typically includes the following key information:

Scheme Details

  • Scheme Name
  • Investment Objective: Capital appreciation, income generation, or both.
  • Type of Scheme: Equity, debt, or hybrid, indicating the underlying assets.
  • Fund Manager: Details the expertise of the fund manager who manages the portfolio and makes investment decisions.
  • Initial Allotment Date: Scheme launch date post New Fund Offer (NFO).
  • Average Assets Under Management (AUM): Average value of managed assets over a specific period.
  • Latest AUM: Total asset value of the scheme on the Fact Sheet publishing date.
  • Latest NAV per Unit: Market value of the scheme’s assets divided by total outstanding units.
  • Load Information: Fees charged for purchasing (entry load) or redeeming (exit load) units.
  • Benchmark Index: Market index for comparing scheme performance.
  • Expense Ratio: Annual fees for managing the scheme, impacting returns over time.
  • Dividend History: Dividend pay-out history of dividend-paying schemes.

Portfolio Data

  • Top Holdings: Lists key investments, offering insights into the fund’s major assets.
  • Sector Allocation (Equity Funds): Shows portfolio distribution across sectors and aids in diversification assessment.
  • Asset Class and Rating Allocation (Debt Funds): Outlines portfolio distribution by asset classes and credit ratings, indicating overall credit risk.

Quantitative/Volatility Measures

  • Standard Deviation (Equity Funds): Quantifies return volatility and reflects fund risk.
  • Beta (Equity Funds): Measures the relative volatility of a fund to its  benchmark index
  • Sharpe Ratio (Equity Funds): Evaluates risk-adjusted returns relative to volatility.
  • Portfolio Turnover (Equity Funds): Indicates trading frequency, revealing potential costs.
  • Modified Duration (Debt Funds): Measures interest rate sensitivity and indicates interest rate risk.
  • Average Maturity (Debt Funds): Represents weighted average time to maturity and tells you about the maturity profile of the underlying instruments in the fund.
  • Portfolio Yield (Debt Funds): Indicates the annual income generated as a percentage of assets.
  • Tracking Error (Index Funds/ETFs): Measures deviation from benchmark index returns and reflects tracking accuracy.

Fund Performance/Returns

  • Returns (1 Year, 3 Years, 5 Years and Since Inception): Displays scheme performance over varying periods.
  • SIP Returns: Shows returns from systematic investment plans and helps in assessing investment approach effectiveness.

Understanding the above parameters would enable you to interpret the Mutual Fund Fact Sheet easily and make informed investment decisions.

Conclusion

It is crucial to analyse the fund’s performance before investing. The Mutual Fund Fact Sheet provides a concise yet comprehensive overview of a scheme’s key details, performance metrics, and portfolio composition. Knowing how to interpret this document allows you to make informed investments, monitor performance, and correct course when necessary.

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