How to Read a Mutual Fund Fact Sheet

A Mutual Fund Fact Sheet is an essential document for any investor looking to understand the nuances of a mutual fund scheme. This document is usually updated and released monthly by the mutual fund house, providing a snapshot of key data points that inform investors about the fund’s performance, strategy, and management. Here’s a breakdown of the most crucial elements you’ll find on a mutual fund fact sheet, along with examples to help you interpret the information effectively.

Investment Objective

The fact sheet will clearly state where the mutual fund invests its assets. This could be in equity-related instruments, debt instruments, hybrid instruments (combining equity and debt), or even specialized sectors like gold. For example, if a fact sheet mentions that the fund invests 70% in equities and 30% in bonds, you know the fund is a hybrid type, providing a mix of growth (from equities) and stability (from bonds).

In the given below example of Parag Parikh Flexi Cap Fund the fund’s objective states that it will invest in Indian equities, foreign equities, and debt.

Source: Parag Parikh Flexi Cap Fund Factsheet

Fund Manager’s Information

The performance of a mutual fund is significantly influenced by the expertise of its fund manager. The fact sheet provides the name and sometimes the track record of the fund manager, offering insights into their management style and experience. For instance, if a fund manager has consistently outperformed their benchmarks in previous funds, this could indicate strong management skills.

Fund Managers of Parag Parikh Flexi Cap Fund.

Source: Parag Parikh Flexi Cap Fund Factsheet

Assets Under Management (AUM)

AUM indicates the total market value of the investments that a mutual fund manages. This figure can give you an idea of the fund’s size and popularity. A larger AUM might suggest trust and stability, whereas a smaller AUM might indicate a newer or niche fund. For example, an AUM of 50,000 crore suggests a widely trusted fund.

Parag Parikh Flexi Cap Fund has almost Rs. 9,000 Cr in AUM.

Source: Parag Parikh Flexi Cap Fund Factsheet

Expense Ratio

This is a critical measure that shows the percentage of the fund’s assets used for administrative and other operating expenses. An expense ratio of 1% means that Rs 1 per Rs 100 invested goes towards expenses. Comparing this ratio with peer funds gives a good indication of cost-efficiency.

Expense Ratio of Parag Parikh Flexi Cap Fund – Direct & Regular

Source: Parag Parikh Flexi Cap Fund Factsheet

Portfolio Holdings

The fact sheet lists major investments (usually the top 10-15) held by the fund. This disclosure helps investors understand where their money is being invested and how diversified their holdings are. For example, if a large portion of the fund is invested in a particular sector or company, the risk might be higher.

Holdings of Parag Parikh Flexi Cap Fund – Direct & Regular.

Source: Parag Parikh Flexi Cap Fund Factsheet

Entry and Exit Loads

These are fees charged to investors when they buy into or sell out of a fund. An entry load of 1% means you will pay Rs 1 for every Rs 100 invested as a fee. Similarly, an exit load might apply if you withdraw your investment within a specified period.

Entry Load of Parag Parikh Flexi Cap Fund is 0 but has an Exit Load of 2%

Source: Parag Parikh Flexi Cap Fund Factsheet

Returns

The fact sheet generally shows- 1 Year, 3 Years, 5 Years and Since Inception returns of the fund concerning Benchmark and an additional benchmark.

Parag Parikh Flexi Cap Fund Fund has given a CAGR of 23.43% in the 5 years and 19.68% since inception.

Lumpsum Investment Performance (Compounded annual returns)

Since inception, returns are calculated on Rs. 10 (allotment price)

The frequency of rolling returns is 1 day
The returns shown above are of Direct & Regular – Growth Plans.
– Returns are calculated since inception with daily rolling frequency for the 3, 5, and 10-year period. (PPFCF)

SIP Investment Performance (Assumption: Rs 10,000/- is invested on the first of every month)

Source: Parag Parikh Flexi Cap Fund Factsheet

Risk Ratios

Important risk measures include-

• Beta: Indicates the fund’s volatility relative to its benchmark. A beta greater than 1 suggests higher volatility.
• Sharpe Ratio: Measures risk-adjusted returns. A higher Sharpe ratio indicates better performance per unit of risk.
• Standard Deviation: Shows the fund’s return variability, with a higher standard deviation indicating greater volatility.
• Portfolio Turnover Ratio (PTR): Shows the percentage of the portfolio that has been bought or sold in a year. A PTR of 20% indicates moderate trading activity.

Source: Parag Parikh Flexi Cap Fund Factsheet

Conclusion

Understanding how to read a mutual fund fact sheet is crucial for making informed investment decisions. By examining these key components, investors can gauge a fund’s strategy, performance, and suitability for their investment goals. Regularly reviewing these fact sheets helps in keeping track of how your investment is being managed and how it is performing in the current market conditions.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.