How to read a Mutual Fund Factsheet?
Do you know your Mutual Fund investment portfolio? Do you know where your money is invested, or which stocks and sectors were added/removed after you invested in the fund? Do you know your fund manager and his past performance? Do you keep up with changes happening with your investments?
As an investor, you should seek answers to these questions before & after investing in a particular Mutual Fund. The Mutual Fund factsheet is a crucial source of information, facts, terminologies, figures, and disclosures that every investor should be aware of while investing in a particular fund.
Factsheets are released every month and contain details about the fund's performance over the period.
Importance of a Mutual Funds Factsheet
- For potential investors, it is necessary to check a mutual fund from various aspects before investing. A mutual fund factsheet helps to understand the risk, return, the fund's objective, portfolio allocation, etc.
- With growing awareness about investments and the active promotion of mutual fund schemes, some investors may get trapped by misinterpreting mutual funds. Carefully reading a factsheet may help them understand the pros and cons of a scheme, which may help them to choose only those that suit their investment objectives and avoid others.
Components of a Mutual Funds Factsheet
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Basic Fund Information
A mutual fund factsheet usually contains the following basic information about the fund.
- Investment objective: It could be to generate capital appreciation, provide regular income, offer liquidity to investors, etc.
- Category : The category of the fund is specified. For e.g., equity, debt or hybrid scheme, and sub-categories like large-cap, mid-cap, small-cap, multi-cap equity scheme, conservative hybrid scheme or aggressive hybrid scheme, etc.
- Type of scheme : It could be an open-ended, close-ended or interval scheme, growth or dividend fund, liquidity fund, etc.
- Assets under management : The total sum of the market value of all securities in the scheme.
- Benchmark index against which the performance of the scheme can be compared.
- The minimum amount of investments required for a lump sum or a Systematic Investment Plan (SIP).
- Exit load : An investor would need to pay charges for redeeming mutual fund units or exiting the mutual fund scheme.
- Riskometer : It indicates the level of risk involved in the concerned mutual fund. The needle of the risk-o-meter points to the amount of risk involved, which can be low, low to moderate, moderate, moderately high, high or very high.
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Details About the Fund Manager
The mutual fund factsheet includes details about the fund manager's qualifications and experience. It may also contain information about the historical returns of the funds managed by the fund manager.
Well-qualified and well-experienced fund managers are likely to make better investment decisions. It is important to understand the factsheet because fund managers will analyse market trends, make investment strategies and ensure legal compliance. They are going to make investment decisions which can have a significant impact on returns generated by mutual funds.
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Portfolio AllocationMutual funds involve an investment of pooled money across various assets and sectors. The mutual fund factsheet constitutes crucial information about the portfolio allocation, which can give you the answer to the following questions:
- In which assets is the money being invested?
- What percentage of net assets is invested in which assets/securities?
- In which industries/ sectors is the money being invested?
- What percentage of net assets is invested in which industries?
- What percentage of net assets is invested in which companies?
- How much cash is idle?
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Performance AnalysisAnother crucial part of a mutual fund factsheet is the details of the fund's historical performance. Usually, this part includes a comparison of scheme returns, SIP returns, returns against the benchmark, and the overall return of the market for one year, three years, five years, ten years or more.
Conclusion
You don't have to be a market expert to stay on top of your investments. You can start with a mutual fund factsheet and read more about mutual funds and their working. The factsheets are fairly easy to read and provide deep insight into your mutual fund working.
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Disclaimer: The views expressed herein are based on internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The information contained in this document is for general purposes only. The document is given in summary form and does not purport to be complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. The information / data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The statements contained herein are based on our current views and involve known and unknown risk and uncertainties that could cause actual results, performance, or event to differ materially from those expressed or implied in such statements. Past performance may or may not be sustained in the future. LIC Mutual Fund Asset Management Ltd. / LIC Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investment made in the scheme(s). Neither LIC Mutual Fund Asset Management Ltd. and LIC Mutual Fund (the fund) nor any person connected with them, accepts any liability arising from the use of this document. The recipients before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
