Invest in mutual funds long-term, review performance too
Invest in mutual funds for the longer term but do review the performance
of the funds in which you have invested at least once a year.
Invest in mutual funds for the longer term but do review the performance of the funds in which you have invested at least once a year. Our mutual fund special edition has been timed in a manner to help you review the performance of your funds just after the end of a financial year and make the necessary changes if required. As has been the practice, this year also we are carrying a comprehensive list of mutual fund schemes with our special edition on mutual funds.
The mutual fund listings this year gets bigger with 1,044 schemes across equity (417), hybrid (157) and debt (470) categories finding a place in it. The funds have been evaluated on various parameters, including returns, relative performance and the risks they carry. As the scorecard gets bigger, we have divided each category (equity, debt and hybrid) of funds further into subcategories to facilitate easy viewing.
To be able to use this information productively, you ought to know how to find what you are looking for. Here's a guide to help you interpret the tables by understanding each parameter (in columns).
FUND SCHEME
The fund schemes in different categories and sub-categories are listed in an alphabetical order. The three broad ones are equity, hybrid and debt. These have been further divided into sub-categories, such as large-cap, multi-cap, mid and small cap, tax planning, index and sectoral, for equity funds. The names of the schemes are followed by rating assigned to them by Value Research and the risk grade of the fund.
BASICS
The next three columns give details of the fund, such as the size of the corpus, the year it was launched and the period for which the current fund manager has been at the helm. The AUMs of funds are as on 31 March 2011. It is important to know the duration for which the fund manager has been around. The longer his tenure, the more stable the fund's return.
PERFORMANCE
One of the best yardsticks to assess an equity mutual fund is its long-term performance. The longer the period, the more reliable the result. This is why, besides the 5-year, 3-year and 1-year returns, we have given 10-year returns for equity and hybrid funds. For debt funds, the period of evaluation is shorter.
Quartile ranking: Returns vary over time and should be judged in relation to schemes with similar objectives. A fund that has delivered consistent returns is better than one that delivers high returns when the markets are up, but wipes out your investment when the markets crash. So, a relative assessment is needed to give a true picture of the fund's performance. This is given in quartile rankings for the past five years. The quartile ranking is simply a division of a particular category of funds into four parts. The top 25% fall in the first quartile, the next 25% in the second quartile, and so on. A fund that has consistently remained in the top quartile is obviously a good choice.
Bear market returns: It will take a long time for equity investors to forget the bear attack of 2008. The bear phase, which began on 8 January 2008, lasted 14 months till 9 March 2009. In this column, we have looked at how the fund performed during these 14 months. This information is especially useful because nearly all funds do well when the markets are on an upswing. It is during a downturn that the true mettle of a fund manager is revealed.
PRICE AND COST
The removal of entry loads has reduced the cost of mutual funds. However, most funds have now introduced an exit load to discourage withdrawals before a year.
Expense ratio: This is what a fund charges you in a year for managing your money.
Minimum initial investment: This is the minimum amount that you can invest in a fund. While this is as low as Rs 500 for ELSS funds, it is generally Rs 5,000 for other equity funds, and Rs 20,000 for debt funds.
The mutual fund listings this year gets bigger with 1,044 schemes across equity (417), hybrid (157) and debt (470) categories finding a place in it. The funds have been evaluated on various parameters, including returns, relative performance and the risks they carry. As the scorecard gets bigger, we have divided each category (equity, debt and hybrid) of funds further into subcategories to facilitate easy viewing.
To be able to use this information productively, you ought to know how to find what you are looking for. Here's a guide to help you interpret the tables by understanding each parameter (in columns).
FUND SCHEME
The fund schemes in different categories and sub-categories are listed in an alphabetical order. The three broad ones are equity, hybrid and debt. These have been further divided into sub-categories, such as large-cap, multi-cap, mid and small cap, tax planning, index and sectoral, for equity funds. The names of the schemes are followed by rating assigned to them by Value Research and the risk grade of the fund.
BASICS
The next three columns give details of the fund, such as the size of the corpus, the year it was launched and the period for which the current fund manager has been at the helm. The AUMs of funds are as on 31 March 2011. It is important to know the duration for which the fund manager has been around. The longer his tenure, the more stable the fund's return.
PERFORMANCE
One of the best yardsticks to assess an equity mutual fund is its long-term performance. The longer the period, the more reliable the result. This is why, besides the 5-year, 3-year and 1-year returns, we have given 10-year returns for equity and hybrid funds. For debt funds, the period of evaluation is shorter.
Quartile ranking: Returns vary over time and should be judged in relation to schemes with similar objectives. A fund that has delivered consistent returns is better than one that delivers high returns when the markets are up, but wipes out your investment when the markets crash. So, a relative assessment is needed to give a true picture of the fund's performance. This is given in quartile rankings for the past five years. The quartile ranking is simply a division of a particular category of funds into four parts. The top 25% fall in the first quartile, the next 25% in the second quartile, and so on. A fund that has consistently remained in the top quartile is obviously a good choice.
Bear market returns: It will take a long time for equity investors to forget the bear attack of 2008. The bear phase, which began on 8 January 2008, lasted 14 months till 9 March 2009. In this column, we have looked at how the fund performed during these 14 months. This information is especially useful because nearly all funds do well when the markets are on an upswing. It is during a downturn that the true mettle of a fund manager is revealed.
PRICE AND COST
The removal of entry loads has reduced the cost of mutual funds. However, most funds have now introduced an exit load to discourage withdrawals before a year.
Expense ratio: This is what a fund charges you in a year for managing your money.
Minimum initial investment: This is the minimum amount that you can invest in a fund. While this is as low as Rs 500 for ELSS funds, it is generally Rs 5,000 for other equity funds, and Rs 20,000 for debt funds.
