When it comes to investing in mutual funds, it is important to do your due diligence and thoroughly analyze the fund before deciding. In this blog post, we will look at how to analyze a mutual fund in five simple steps.
Step 1: Look at the fund's performance history
One of the first things to consider when analyzing a mutual fund is its performance history. Look at the fund's returns over the past 1, 3, 5, and 10 years to get an idea of how it has performed in different market conditions. You can compare the fund's returns to those of its benchmark index and peers to see how it stacks up.
Step 2: Analyze the fund's portfolio
Another important aspect to consider when analysing a mutual fund is its portfolio. Look at the fund's top holdings, the sectors, and industries in which it invests, and the geographical diversification of the portfolio. This will give you an idea of the fund's risk profile and investment strategy.
Step 3: Check the fund's expense ratio
The expense ratio is the annual fee that a mutual fund charges to cover its operating expenses. A lower expense ratio generally means that more of the fund's returns will go towards your investment. Compare the fund's expense ratio to that of its peers to see if it is in line with industry standards.
Step 4: Look at the fund's manager and management team
The fund manager and management team play a crucial role in the performance of a mutual fund. Look at the manager's investment strategy and track record, as well as the tenure of the management team. A manager with a long track record of success and a stable management team can be a good sign.
Step 5: Check the fund's risk level
Lastly, consider the fund's risk level. This can be measured by volatility and the standard deviation of returns. A higher standard deviation of returns indicates a higher level of risk. Compare the fund's risk level to that of its peers to see if it is in line with your investment goals and risk tolerance.
A mutual fund analytical solution like MFI360 Research from ICRA Analytics will help you with the above. It offers you a detailed analysis and real-time data on mutual funds’ performance, which can be helpful in identifying the mutual funds that meet your investment goals. It also provides the data on expense ratio, fund manager, and management team which can help to analyze the mutual fund in a more detailed way.
To know more about the solution, click here!
FAQs
Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).
How do you compare 5 mutual funds? ›
How to compare mutual funds?
- Expense Ratio. The expense ratio is the fee that fund houses charge for managing your investment portfolio. ...
- Investment Objective. ...
- Mutual fund performance comparison. ...
- Risk Profile. ...
- Asset Under Management (AUM) ...
- Exit Load.
How to analyze a mutual fund in five simple steps
- Step 1: Look at the fund's performance history. ...
- Step 2: Analyze the fund's portfolio. ...
- Step 3: Check the fund's expense ratio. ...
- Step 4: Look at the fund's manager and management team. ...
- Step 5: Check the fund's risk level.
Mutual fund analysis typically consists of an elementary analysis of the fund's strategy (growth or value), median market cap, rolling returns, standard deviation, and perhaps a breakdown of its portfolio by sector, region, and so on.
What if I invest $1,000 a month in mutual funds for 20 years? ›
If you were to stay invested for a shorter duration, say 20 years, you'd invest Rs 2,40,000, but your portfolio value would be Rs 9.89 lakh. A decade-long investment of Rs 1,000 per month would equal Rs. 2,30,038, as compared to Rs. 1,20,000 invested over the same period.
What is 15 15 30 rule in mutual funds? ›
15 X 15 X 30 rule of mutual funds
If u do a 15,000 Rs. SIP per month for 30 years (instead of 15 years as earlier), at a 15% compounded annual return, You will be able to accumulate 10 CRORE against 1 crore if u invest for 15 years), said Balwant Jain.
What is the 5 25 rule for mutual funds? ›
Let's start with the 25:1 and 50:5 rule, a sort of “bright line test” with two simple guidelines: One issuer cannot contribute more than 25% of the portfolio's fair market value. Five or fewer issuers cannot contribute more than 50% of its fair market value.
What are the 4 P's of mutual funds? ›
One such guiding framework is the 4 Ps—People, Philosophy, Process, and Predictability serving as a comprehensive guide in this regard. Let's delve into each of these aspects to help your investors make informed decisions: People: The individuals behind a fund house play a pivotal role in shaping its performance.
What are 5 mutual funds? ›
Best-performing U.S. equity mutual funds
| Ticker | Name | 5-year return (%) |
|---|
| STSEX | BlackRock Exchange BlackRock | 16.27% |
| USBOX | Pear Tree Quality Ordinary | 16.13% |
| FGLGX | Fidelity Series Large Cap Stock | 16.08% |
| PRCOX | T. Rowe Price U.S. Equity Research | 16% |
3 more rowsMar 29, 2024
A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.
Summary: Best Mutual Funds
| Fund (ticker) | 10-Year Avg. Ann. Return |
|---|
| Schwab S&P 500 Index Fund (SWPPX) | 12.99% |
| Shelton Nasdaq-100 Index Investor Fund (NASDX) | 18.21% |
| Schwab Fundamental US Large Company Index Fund (SFLNX) | 11.71% |
| Fidelity Intermediate Municipal Income Fund (FLTMX) | 2.28% |
6 more rowsApr 1, 2024
Low Fees or Expenses
Mutual funds with relatively low expense ratios are generally always desirable, and low expenses do not mean low performance. In fact, it is very often the case that the best-performing funds in a given category are among those that offer expense ratios below the category average.
What is the 75 5 10 rule for mutual funds? ›
Diversified management investment companies have assets that fall within the 75-5-10 rule. A 75-5-10 diversified management investment company will have 75% of its assets in other issuers and cash, no more than 5% of assets in any one company, and no more than 10% ownership of any company's outstanding voting stock.
What's the best indicator of a successful mutual fund? ›
Common technical indicators that can help evaluate a mutual fund as a good or bad investment include trendlines, moving averages, the relative strength index (RSI), support and resistance levels, and chart formations.
What are the ratios used to Analyse mutual funds? ›
They are alpha, beta, standard deviation, r-squared, and the Sharpe ratio. These statistical measures are historical predictors of investment risk/volatility, and they are all major components of modern portfolio theory (MPT).
How do you determine if a mutual fund is a good investment? ›
Compare the funds' operating expense ratios—what the fund charges to cover its operating expenses. In addition, be sure to look for any loads—one-time sales commissions—or transaction fees the fund may have.
