HOW TO ANALYZE MUTUAL

FUND PERFORMANCE

Investors aim to diversify their investments in order to minimize risk

and gain maximum returns With a wide range of investment
avenues, it becomes difficult to keep a track of the investment made
and the returns generated on them. Therefore, before making an
investment decision, it is important to study and analyze the past
performance of the instrument.

Understanding the mutual fund portfolio needn’t be tedious. It does

not require any special skills or technical knowledge. You only need
to know what to look for and what to avoid.

HOW TO ANALYZE MUTUAL FUND PORTFOLIO?

Whether you are planning to increase allocation in a particular fund
or to exit a fund, it is important to analyze the performance of the
same before making a decision. Here are some tips that will help you
do the same:
 1. Understand the market and the economic cycles
2. Get familiar with mutual fund statistics
3. Know and analyze the portfolio
4. Focus on a longer period for mutual fund performance
5. Know the good and bad performance

Let us understand each one of them in detail:

 Understand the market and the economic cycles

The first step for any investor is to understand the ups and
downs of the market and the impact of economic changes on
the fund. Talk to investment advisors or fund managers about
the performance of a long-term fund and gain insights into how
the market changes have affected the returns on the fund.

 Get familiar with mutual fund statistics

In order to analyze the portfolio, it is important to understand

the basic terms and statistics associated with mutual funds.
Most investors are familiar with the price-earnings ratio as it is
the easiest to analyze. The ratio can help figure out if the fund
is growth-oriented or value-oriented. Apart from this, there are
various other ratios specific to mutual funds such as the Sharpe
ratio and the Treynor ratio, which needs to be studied.

 Know and analyze the portfolio

It is important to analyze where the fund manager has invested

a majority of your money. Mutual funds are a mix of debt and
equity and the fund managers concentrate on both in order to
diversify the risk. One of the easiest ways to understand the
portfolio is to consider the top holdings, which will have easily
recognizable stocks. The performance of the top stocks will
allow you to analyze the overall portfolio.
  Focus on a longer period for mutual fund performance

In order to judge the mutual fund performance, do not

consider a short duration, as short-term investments do not
give an insight into the overall performance. The fund could
look strong or weak in a shorter period but an analysis should
be made for a period of five or ten years. Also, while judging
the skills of the fund manager, it is wise to consider a longer
period since the impact of the market and economic conditions
will influence the performance of the manager.

 Know the good and bad performance

Investors should be able to understand when the mutual fund

performance is good and when it is bad. The fund that has
performed exceptionally well in a year might not perform
equally well in a three-year period. Also, short-term funds
attract higher investment as compared to long-term funds and
funds high on the asset are difficult to manage. Hence,
abnormally high returns do not always mean good
performance.

Gain complete knowledge about the investment instrument before

you make a decision to invest. Different fund managers will offer
different advice for investment; it is up to you to analyze the
performance of the fund and decide on one. At Angel Bee, you can
avail personalized investment recommendations based on your
requirement. The ARQ investment engine, a part of the Angel Bee
mobile application, uses the latest technology to offer investment
recommendations and it is free of human intervention. 
TYPES OF MUTUAL FUNDS

There are different types of mutual funds in India available in the

market which an investor can choose depending on his profile, risk
taking capacity and time horizon.
The classification of mutual funds can be done on either the
investment objective or on structure of the mutual fund let’s go
through each one of these classifications by looking at the chart
below and understand what actually they mean.
Mutual funds offer one of the most comprehensive, easy and
flexible ways to create a diversified portfolio of investments. There
are different types of mutual funds that offer different options to
suit investors diverse risk appetites. Let us understand the different
types of mutual funds available currently in the market.
1. Structure of Mutual Funds
2. Investment Objective Mutual Funds
3. Others Mutual Funds
1. Structure of Mutual Funds
 Open- Ended funds:
• Close-ended funds:
Close-ended funds have a pre-decided unit capital amount and also
allow purchase only during a specified period. Here, redemption is
bound by the maturity date. However, to facilitate liquidity, schemes
trade on stock exchanges.

• Interval funds:
A cross between open-ended and close-ended funds, interval mutual
funds permit transactions at specific periods. Investors can choose to
purchase or redeem their units when the trading window opens up.  

2. Investment Objective Mutual Funds

a. Equity Funds These funds primarily invest in the equities or shares
of various companies. Since, they tend to reap high returns, they are
generally considered to be high risk.