Have you been skipping the emails or procrastinating reading the booklet titled factsheet sent each month by your mutual fund asset management company? If you are looking to understand more about the schemes that you have invested in and also get crisp insights into development of the economy and the stock market over the past month, then the factsheet is the right document you should be heading to.
The factsheet is the snapshot carrying all the essential details of the entire basket of schemes managed by a fund house.The details of the fund manager, the time period since when he/she has been managing the scheme and the other schemes handled by them too can be accessed through the factsheet.
The focus of any particular fund is known through the investment objective. The risk-o-meter – segregating funds in five risk buckets – would assist those zeroing down on funds by giving them a peek on the level of risk that the money invested in funds would be exposed to. The box besides the risk-o-meter would specify the type of investors that should be looking to invest in the scheme.
The factsheet is also the best place to know the portfolio of the scheme that you are invested in or are looking to invest in. The portfolio is nothing but the list of top 10-15 investments made by the equity or debt scheme.
The stocks and the sectors that the equity fund manager is upbeat on too would be known by studying the portfolio. Similarly, the quality of papers – A, AA, AA-, AAA – selected by the debt fund manager can be assessed through the portfolio of a debt scheme such as liquid funds, income funds, short-term or dynamic bond fund.
One should examine whether the scheme is heavily invested in any particular stock or sector which is currently in doldrums. For instance, oil marketing companies impacted during the fall in oil prices, agriculture stocks when there is rain deficit.
There are several ratios mentioned in the factsheet. Alpha measures the difference between a fund’s actual returns and its expected performance given the level of risk, and indicates the risk-adjusted performance of a portfolio. On the other hand, Beta measures the sensitivity of a portfolio against its benchmark, which can be in the range of 1, >1 or <1 for equity funds, wherein 1 indicates fund’s NAV will move in same direction as that of benchmark index and that of less than 1 indicates the fund’s NAV would be less volatile than the benchmark index.
Sharpe ratio measures the additional return a fund has generated relative to the risk taken. The higher the sharpe ratio, the better a fund’s return in lieu of the risk. Turnover ratio is another important parameter to take your magnifying glass to, which indicates the number of shares bought or sold by the equity fund over a period.
Toward the end of the details of all individual schemes of a fund house, the growth of systematic investment plan investments in schemes across 1 year, 3 years, 5 years, etc, is elucidated.
The fund factsheet also shows the growth of a standard investment of Rs 10,000 since inception of the fund and over various time periods. You can compare the growth of Rs 10,000 invested in the fund vs the Benchmark returns. When you are comparing the returns of equity schemes don’t form your opinion based on immediate term returns such as 3-month or 6-month returns. Analyse the 3-5 year returns as short-term stock-market volatility may impact the returns, and equity investments are meant for longer horizon.
Consistency of returns over various time period too can be assessed. When pegging them against other schemes, always remember not to compare apples to oranges. So, you cannot weigh the difference in returns of a mid-cap (mid-sized companies) scheme against a large-cap (bigger companies) scheme.
The details of the past couple of dividends doled out by the scheme too can be known from this document. If you are looking to withdraw your investments in a scheme, then keep an eye on the exit load timeline.
The factsheet also makes it easy for you to gauge the shift in focus on sectors over a time period. So, if you want to see whether the past calls of the scheme have been in line with market movements, then you can easily pull out the old factsheets and you would have a treasure trove of information at your disposal
