The right way to check the performance of your mutual funds
mutual fund performance but unsure where to begin? Fret not!—ET Markets has got your back! In a special episode of ET Smart Investor, we sat down with Arun Kumar, VP & Head of Research at FundsIndia, to get expert insights on the best methods for monitoring fund performance.
Excerpts:
What’s the starting point for tracking performance?
Arun Kumar: A common mistake is starting by focusing on individual funds. Instead, start by assessing the entire portfolio. Set a review frequency of 3 to 6 months, ideally 6 months. First, analyze overall portfolio performance for 1, 3, 5, and 7 years, giving more weight to longer periods. One-year performance is often noise but can indicate short-term outliers. Use a benchmark that aligns with your portfolio (e.g., 70% equity, 30% debt), not just a pure equity index like Nifty 50. After reviewing the portfolio, drill down into asset classes like equity, debt, and gold, and compare them with relevant benchmarks. Finally, analyze individual funds against both broad (e.g., Nifty 50) and specific fund-level benchmarks.
How often should short- and medium-term investors check?
Arun Kumar: Six months is still a good timeframe, even for short- and medium-term investors. Fund changes typically don't happen within short periods, but keep an eye on any major shifts like management or style changes. A quick review every three months is fine, but a detailed review every six months should suffice.
How can you easily determine if your fund is underperforming compared to the benchmark,
