Tips on How to Measure and Track Mutual Fund Performance

An increasing number of retail investors are ditching the intermediaries and directly investing in mutual funds through online portals. But when you are investing on your own, it's essential that you thoroughly analyze the past performance of the scheme. While past performance doesn't indicate future potential, it is still a critical step to making informed decisions.Similarly, once you’ve invested, you should religiously track fund performance to ensure it aligns with your expectations. Here are some of the ways in which you can analyze mutual fund performance before and after investing-

If you're new to mutual funds, then here’s how you can choose promising funds for your portfolio-

1. Know Your Investment Objective and Risk Appetite

A journey without a destination is no journey at all. Before you start analysing schemes, it is critical to clearly define your objectives and risk appetite as it’ll help you shortlist fund categories.For instance, equity funds are riskier but ideal for long-term goals. On the other hand, debt funds are safer bets for short-term objectives.

2. Compare Schemes Against Their Benchmark

Every mutual fund scheme has a benchmark. An effective way to analyze their performance is to compare them against the performance of their benchmark. If you find schemes that have consistently beaten their benchmark in the longer run, then they can be ideal picks for your portfolio.

3. Compare Similar Schemes

The above step should provide you with a list of schemes from your preferred fund category. In the next step, you can compare the performance of these schemes against each other.Ensure that you always compare the performance of schemes that belong to the same fund category. For instance, you can't compare a large-cap equity scheme with a small-cap scheme.

4. Analyze the Fund Manager

It is generally recommended that you should select a scheme managed by someone with extensive industry and fund category experience. If the fund manager has been managing the scheme for a long time and has delivered excellent returns across market cycles, then you can consider adding the scheme to your portfolio.

5. Check the Expense Ratio

The expense ratio is the fund management fee directly deducted from your investment amount. A higher expense ratio would mean reduced returns on your investment in the longer run.Thus, before investing, ensure that you check the expense ratio of the scheme to confirm that it is in line with the fee charged by other similar schemes.

It is equally important to track mutual fund performance after investing. Here are some of the ways in which this can be done-

1. Online Mutual Fund Account

When you invest through the official website of the fund house, you are generally required to create an account. If you’ve used one such account for investing, then you can use the same for tracking fund performance after investing. The official website of the fund house is the best source for accurate and latest information.

2. 3rdParty Portals and Apps

You can also find several online portals and apps that track mutual fund performance . Many of these platforms also allow you to create a watch-list with your preferred schemes. You can use these free platforms to create a watch-list of the scheme you’ve invested in to track their performance.

3. Fund Fact Sheet

Every fund house also releases a fund fact sheet for all the schemes they offer every month. It is a one-page document that offers an excellent overview of the scheme portfolio and performance.
You can find the fact sheet on the official website of your fund house. Most fund houses also send the fact sheet to their investors through email.

4. Consolidated Account Statement (CAS)

If you’ve invested in multiple schemes from various fund houses, then the CAS can also offer a detailed overview of your investments. It is a monthly report of all the transactions you’ve performed across your mutual fund accounts linked to the same PAN. But no CAS is generated for months when there are no transactions in your mutual fund account.

Evaluating fund performance before investing will help you choose the right schemes for your portfolio. Even after investing, you should constantly track scheme performance to ensure that the investment performs according to your expectations. It’ll also help you decide whether you should switch, exit, or increase the investment to avoid losses and generate higher returns.But if the DIY approach is not working for you, then it’d be wise to consult an investment advisor who can help you select mutual funds that best match your investment objectives and risk appetite.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.