KNOWLEDGE CENTRE Mutual Funds Investment Guide / How to Analyze A Mutual Fund Portfolio
Share

How to Analyze A Mutual Fund Portfolio


How to analyze mutual fund performance?

Investors aim to diversify their investments in order to minimize risk and gain maximum returns With a wide range of investment avenues, it becomes difficult to keep a track of the investment made and the returns generated on them. Therefore, before making an investment decision, it is important to study and analyze the past performance of the instrument.

Understanding the mutual fund portfolio needn’t be tediou. It does not require any special skills or technical knowledge. You only need to know what to look for and what to avoid.

How to analyze mutual fund portfolio?

Whether you are planning to increase allocation in a particular fund or to exit a fund, it is important to analyze the performance of the same before making a decision. Here are some tips that will help you do the same:

  1. Understand the market and the economic cycles
  2. Get familiar with mutual fund statistics
  3. Know and analyze the portfolio
  4. Focus on a longer period for mutual fund performance
  5. Know the good and bad performance

Let us understand each one of them in detail:

  • Understand the market and the economic cycles

    The first step for any investor is to understand the ups and downs of the market and the impact of economic changes on the fund. Talk to investment advisors or fund managers about the performance of a long-term fund and gain insights into how the market changes have affected the returns on the fund.

  • Get familiar with mutual fund statistics

    In order to analyze the portfolio, it is important to understand the basic terms and statistics associated with mutual funds. Most investors are familiar with the price-earnings ratio as it is the easiest to analyze. The ratio can help figure out if the fund is growth-oriented or value-oriented. Apart from this, there are various other ratios specific to mutual funds such as the Sharpe ratio and the Treynor ratio, which needs to be studied.

  • Know and analyze the portfolio

    It is important to analyze where the fund manager has invested a majority of your money. Mutual funds are a mix of debt and equity and the fund managers concentrate on both in order to diversify the risk. One of the easiest ways to understand the portfolio is to consider the top holdings, which will have easily recognizable stocks. The performance of the top stocks will allow you to analyze the overall portfolio.

  • Focus on a longer period for mutual fund performance

    In order to judge the mutual fund performance, do not consider a short duration, as short-term investments do not give an insight into the overall performance. The fund could look strong or weak in a shorter period but an analysis should be made for a period of five or ten years. Also, while judging the skills of the fund manager, it is wise to consider a longer period since the impact of the market and economic conditions will influence the performance of the manager.

  • Know the good and bad performance

    Investors should be able to understand when the mutual fund performance is good and when it is bad. The fund that has performed exceptionally well in a year might not perform equally well in a three-year period. Also, short-term funds attract higher investment as compared to long-term funds and funds high on the asset are difficult to manage. Hence, abnormally high returns do not always mean good performance.

Gain complete knowledge about the investment instrument before you make a decision to invest. Different fund managers will offer different advice for investment; it is up to you to analyze the performance of the fund and decide on one. At Angel Bee, you can avail personalized investment recommendations based on your requirement. The ARQ investment engine, a part of the Angel Bee mobile application, uses the latest technology to offer investment recommendations and it is free of human intervention. Download the app today and use it to achieve your financial goals.


Download Angel Bee App

FOR YOUR MUTUAL FUND INVESTMENTS TODAY!
Get The App
Mutual Funds

I have a lumpsum amount that I'd like to invest.