Not Checked Your Mutual Fund Performance? Do Now to Remain Safe!

Call it the blind faith or ignorance, many a times it is seen that investors do not look back at their investments and end up losing the money battle. Either they forget or rely too heavily on the words of the people who actually convinced them to invest. Any investments, if not assessed properly, could turn into nothing. When you talk about a mutual fund, whose movement depends a lot on the happenings in the capital and debt markets, a regular and careful evaluation is the call of the day. There can be many investors reading this story who won't know how to assess the mutual fund performance, right! So, this whole article could just be what you would require.

Performance Comparison with Peers-

In your exercise of mutual fund performance evaluation, the first factor to look at is where your funds, which accept subscription from the investors, stand in competition with their peers. It would be fair if you compare the performance of your funds with those in the same category. Suppose if you have invested your money in a mid-cap fund, make sure you compare its performance with a fund of the same type. It is because of the fact that different types of funds have different modus operandi, asset allocation and objectives. A large-cap fund, which invests predominantly in large- cap stocks, would most probably look to build your capital over the long-term. While the mid-cap funds invest mainly in mid-cap stocks and look to appreciate the capital.

Compare with Benchmark Index-

The performance evaluation does not end by comparing the funds with their peers. You also need to compare with the benchmark index in order to get an actual estimation of your mutual fund performance. So, if you have parked your money in a mutual fund that invests in large-cap stocks listed on Bombay Stock Exchange (BSE), you should then compare the fund's performance with the  large-cap index, which is a benchmark. For Example-If the large-cap index have offered a return of 60% and the return from your fund is 28%, it means the under-performance. Benchmarking is an effective tool to compare the performance of your funds with the competition existing in the market.

Quality of Asset Allocation-

Depending on the type of assets chosen for investment, the performance of the funds can get impacted either way. If your fund has invested in a mix of securities that have performed well over a period of time, it's worth investing in that particular fund. Else, you should check out the asset allocation of other funds and choose to go with a one that has a proper mix.

Track Record of Fund Manager-

The profitability from mutual fund investment is also contingent upon how well the fund managers, who are appointed by the asset management company (AMC), play their role. Based on the efficacy and knowledge of the fund managers, the performance of the funds can vary. Fund managers are the important cog in the mutual fund wheel as they make subtle decisions with regards to the shifting your investment from one security to another based on the prevailing market conditions. However, if they fail to analyze the conditions correctly, it could lead to massive losses for you to deal with. So, do make a point to check the track record of the managers as to how well they have performed over the years. It is safe to go with a proven and experienced fund manager as he/she has stood the test of times to make sure the investors are on the safe path.

Keep an Eye on Risk-adjusted Returns-

Risk-adjusted returns, by name, suggests the performance of your fund against the indicative risks. The funds with lesser risk are often found to have greater risk adjusted returns than the ones with a higher risk.

So, these were the important points which you must keep in mind while assessing the performance of your funds. A careful evaluation and a correct comparison keeps you on the safe shore and help achieve your investment objectives, which could be anything from education & marriage of your kids to visiting the exotic locations of the world.



Article Source:
https://article.wn.com/view/2017/02/15/Not_Checked_Your_Mutual_Fund_Performance_Do_Now_to_Remain_Sa/