Mutual Fund Analysis: What should you know before buying any Mutual Fund?

Your mutual fund investments just got more powerful

At INDmoney, it has always been our endeavor to ‘improve the financial lives’ of our users. In line with this objective, we have launched 8 new features in our mutual fund suite, to help you make better decisions with your money. These new features will provide insights into the risk and return profile, sectoral allocation, top gainers and losers, fund manager history and taxation, among others to give better insights into your investments.

New Features

• Unbiased, data-based ranking in its category
• Pros and Cons of mutual fund
• Deep-dive X-ray of portfolio holdings - Sector, Stock level
• Which stocks your fund manager bought and sold?
• Which stocks were the biggest gainers and losers in your mutual fund?
• Similar funds comparison
• Fund Manager details and performance of other funds managed by him

Let us walk you through these features.

Unbiased, data-based ranking in its category

• Search for a mutual fund of your choice. The first thing you will see is the ‘INDmoney Rank’ for the fund. 

How is INDmoney rank determined?

The INDmoney Rank for a mutual fund is based on 3 parameters: 

Performance Score

This measures a fund’s consistency in generating returns, outperformance with respect to the benchmark & consistency in beating the benchmark. Higher percentage indicates good performance of the fund.

Risk Score

This measures a fund's ability to contain downside risks, volatility & control losses during the market correction. Higher percentage indicates good risk management strategy followed by the fund.

Cost Score

This takes into account the expense ratio of the fund. Higher percentage indicates better cost effectiveness of the fund.

Pros and Cons of mutual fund

Based on the above 3 factors, the IND quant engine also comes up with easy to understand pros and cons for each fund. Below are some sample insights for a particular mutual fund. 

Deep-dive X-ray of portfolio holdings - Sector level

This feature allows you to get a bird’s eye view of which sector your fund manager is investing into. 

Quant Mid Cap Fund Growth Option Direct Plan: Sector Allocation (May'23-Jul'23)

Here are a few insights that can be drawn from the above table. 

• From the table above, we can infer than the fund manager is reducing his stake in financial services, and overweighting the communication sector (from May- Jun 23)
• At the same time, the fund manager is turning cautious on the technology sector and betting on industrials. 

Deep-dive X-ray of portfolio holdings - Stock level

Once you identify what’s happening at the sector level, it's important to look at the action in specific stocks. INDmoney also provides an X-ray at the stock level. 

Using this feature, you can get specific insights into:

• The total holdings of the fund
• The split between equity and debt holdings
• You can also check the holdings trend, to find out whether the fund manger is now bullish or bearish on a particular stock. Has he overweighted a particular stock? 
• What is the change in holdings from the previous month?

Which stocks did your fund manager buy and sell?

In the what changed section of the mutual fund, you can understand: 

What changed at the asset allocation level between debt, equity and cash? 

• How has the allocation changed between large, mid and smallcap change within equities?
• Which all stocks has the fund manager increased his allocation (top 3)
• In which of the stocks has the fund manager decreased allocation (top 3)
• In this section, you also get insights into change in AUM from the previous months
• The fund returns comparison with the benchmark for this month vs the last month is also provided 
• As part of the stocks X-ray you also get access to Concentration Analysis in the fund. What is the concentration of top 5 companies? Which stock has the highest weightage?
• How many sectors is the fund exposed to? Which sector has the highest concentration?

Which stocks were the biggest gainers and losers in your mutual fund?

• The next feature helps you to track the biggest gainers and losers in your mutual fund on the basis of the last one month return. 

• From the above chart, it is evident that Larsen & Tourbo LTD, TATA Consultancy and ICICI Bank drove the performance of the fund, while Hindustan Unilever, HDFC Bank, Reliance Industries dragged.

Similar funds comparison

• The peer analysis section first gives an overview of peers of the mutual fund. It compares the AUM and expense ratio of the peers.
• Under this section, you can also compare the performance of the fund on the basis of 1 year, 3 year, 5 year and Year-to-date returns. 

You can also compare the fund on the basis of important risk-return ratios such as Sortino ratio, Jensen’s alpha, Information Ratio and Standard deviation. Here’s what each of these ratio’s mean: 

• Sortino ratio: This ratio measures the risk-adjusted return of the portfolio considering only the downside deviation. Hence, the formula for Sortino ratio= (Portfolio return - riskfree rate) / Downside Deviation. As the Sortino ratio considers only downside deviation, it gives a better view of the risk-adjusted return of the portfolio. 
• Alpha ratio: This is the ‘excess return’ or the return ‘over and above’ the required rate of return for the portfolio. Alpha = Portfolio return – risk free rate – Beta (Market Benchmark Return-Risk free rate)
• Standard deviation: This is the measure of total volatility/ risk in the portfolio. 

Fund Manager details and performance of other funds managed by him

• The final section provides insights into the fund manager’s profile. 

The annualised returns and category returns are compared for the top managed funds of the manager.
Check out these latest features on the INDmoney App.