Understanding the key ratios and attributes of fund factsheets for mutual funds is crucial before investing in a mutual fund scheme. It gives essential information about the plan composition, fund house, and cash outflow. A fund factsheet is a crucial document that provides an overview of a mutual fund and demonstrates its performance. Potential investors use this report for analyzing and evaluating a fund scheme along with learning its pros and cons.
A mutual fund factsheet includes a comprehensible image of the fund through easily digestible illustrations, descriptions, and charts. Disclosed monthly, let’s look at the top key ratios and attributes these factsheets include.
Components of a Factsheet
The factsheet gives out the following details about a mutual fund:
- Fees: Mutual fund charges an expense ratio for money management and the fund house’s overall administration. The investor will find fee details in the factsheet to know how much they need to pay to the manager.
- Risk Assessment: Different investors might be interested in different mutual funds depending on their risk tolerance and financial standing. The investors must assess the risk involved with a particular fund and invest according to their financial position.
- Annualized Returns: Before investing in a mutual fund, the investor must evaluate it from the returns perspective. The fund factsheet contains a record of a fund’s returns over the last few years, based on which the investor can examine its performance.
Key Ratios Included in Mutual Fund Factsheets
- Portfolio turnover ratio to measure a fund’s trading activity
- Expense ratio, which is the cost of fund management
- Beta to measure a fund’s volatility in comparison to the benchmark
- Sharpe ratio to measure a fund’s performance in relation to the risk involved
- R-squared to measure the relationship between the benchmark and the portfolio
- Information ratio to measure a fund’s risk-adjusted returns
Interpreting a Mutual Fund Factsheet
Factsheets contain a lot of significant information investors must consider before making their investment decisions. The information covers the fund’s following aspects:
Basic Details: It includes general details about the mutual fund, like its objectives, plan, options, minimum investment amount, net asset value, etc. It has product labeling to highlight a fund’s suitability and riskometer to assess the associated risk.
Performance Details: Historical performance details of a fund gives a clear picture of how it fared across different time frames. The investors may compare it to the fund’s benchmark using performance tables and graphical representations.
Fund Manager Details: A fund’s successful management depends on the fund manager’s experience and expertise. The factsheet includes the fund manager’s qualifications and experience to let the investors understand it better.
Portfolio Attributes: The factsheet contains crucial portfolio attributes, including asset allocation, credit quality, sector and company allocation, instrument break-up, etc. It also gives information about the fund’s quantitative data, including the average maturity period, modified duration, yield to maturity, etc.
Fund factsheets are investors’ reliable guides, saving them from unpredictable market volatility and fluctuations. Therefore, investors must use them consistently to mitigate or spread the risks and make diligent investment decisions.