Educate Yourself

Investor Track

Why should investors track their Mutual Fund Investments?

As with any investment, investors need to know how the scheme of the Mutual fund in which they have invested is performing.  It is recommended that a mutual fund portfolio be reviewed once every six months.

    1. How can an investor track the performance of his scheme?

      Some of the ways in which an investor can track the performance of his scheme are as under:

      The website of the fund house has the details of the portfolio of the scheme in which the investor has invested.

      Fund houses release a monthly factsheet that has details of all schemes and their portfolios with the stocks in which the scheme has invested. The factsheet also indicates how the scheme has fared compared to its benchmark, the annualised return given by the scheme as well as important ratios such as standard deviation, Beta and Sharpe ratio.

    2. How does one know if his fund is performing well?

      In order to understand performance of mutual fund schemes it should be compared with similar funds in the category and with its benchmark. For example, a large cap fund can be benchmarked with BSE 100 or Nifty 50 index. Besides, there are many independent websites too that track performance of schemes. Regular review of performance of scheme vis-à-vis peers in the same category over various time frames such as quarterly, half yearly or yearly basis is a good habit.

    3. Are there any changes that should be observed?

      Keeping an eye on changes in the fund house is a good idea. These could pertain to changes in promoter, fund management or other key personnel. If the fund manager has changed, there could possibly be a change in investment style and hence it is important to track the portfolio once the new fund manager takes charge. There could also be ownership changes, wherein a new promoter comes in. The likely impact of such changes require relevant adjustment in the portfolio, consult your financial advisor to discuss the way forward.

    4. My scheme has underperformed, what should I do now?

      Investors should not take an impulsive decision and exit the fund for poor performance. It is advisable that investors give atleast 12 months, post which if the fund does not perform in line with its benchmark, one may consider exiting the fund. However, do bear in mind the tax implications on exiting the scheme.

      Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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