How To Evaluate Performance Of Mutual Fund Investments

How do you know that your mutual fund investments are performing well? Here are some tips to do it the right way and avoid common pitfalls like comparing performance with incorrect 
benchmarks.

Hello and welcome to FundooMoney, your 24X7 buddy for all your money matters! When it comes to investing in mutual funds, investors tend to look first at mutual fund performance. However, the irony is that most mistakes by investors occur after incorrect assessment of the performance of their investments. So, how does an investor do the right things? We tell you all about it in just a little while.

Have a performance monitoring system
Monitor your mutual fund investments’ performance at regular intervals. Track your scheme's net asset value (NAV) on a quarterly or half-yearly basis. Look for changes in your fund’s portfolio. For equity funds, compare the scheme's performance with that of the Sensex, or similar schemes of other mutual funds.

Ensure that the fund is adhering to the objectives stated in its offer document. Keep track of periodic statements like newsletters, and half-yearly and annual reports. Read them thoroughly and file them for future reference. If you have queries, contact the investor service centres or agents. Some mutual funds maintain websites which provide information on schemes, NAVs, the industry and the investment outlook.

Examine the reason for underperformance 
If your scheme fares badly for two consecutive quarters, find out whether it is because of a depressed capital market, or due to reasons specific to your scheme. Don't get hassled if your scheme underperforms in a runaway market. However, if it is underperforming in a falling market i.e. the fall in the scheme's NAV is greater than the fall in the benchmark index, review your investment.

Read the fund manager's comments in newsletters and the annual report. Continue with the scheme only if you are satisfied with the explanations provided. If you can’t do frequently follow-ups, make sure you track your fund at least every 18-24 months.

We hope you found this useful. Do share your tips on how to assess mutual fund performance in the comments section. For more such actionable personal finance information and regular uploads, subscribe to our channel. Also, visit our website, download our mobile app and stay connected with us on Instagram, Pinterest and Slideshare.