How much did your fund earn last year? What is the minimum investment for the best income plan? When was a particular fund launched? For how long has the current fund manager been at the helm? Find answers to these and other pertinent questions in the tables that follow. It is a comprehensive listing of 774 mutual funds across three broad categories and 17 sub-categories. The funds have been evaluated on various parameters, including returns, relative performance and the risks they carry. They pack in useful information that can help you separate the chaff from the grain when you shop for mutual funds. To be able to use this information productively, you ought to know how to find what you are looking for. Here's a guide to help you interpret the tables by understanding each parameter.
Fund scheme
The fund schemes in different categories and sub-categories are listed in an alphabetical order. The three broad ones are equity, hybrid and debt. These have been further divided into sub-categories, such as diversified, tax planning, index and sectoral, for equity funds. This year we have also included the star rating assigned to funds by Value Research. This rating is based on the composite evaluation of a fund on several parameters. This is followed by the risk grade of the fund.
Basics
The next three columns give details of the fund, such as the size of the corpus, the year it was launched and the period for which the current fund manager has been at the helm. The AUM of funds are as on 30 April 2010. Remember that the size of assets has no bearing on a fund's return. However, it's important to know the duration for which the fund manager has been around. The longer his tenure, the more stable the fund's return.
Performance
One of the best yardsticks to assess an equity mutual fund is its long-term performance. The longer the period, the more reliable the result. This is why, besides the 5-year, 3-year and 1-year returns, we have given 10-year returns for equity and hybrid funds. For debt funds, the period of evaluation is shorter.
Quartile ranking: Returns vary over time and should be judged in relation to schemes with similar objectives. A fund that has delivered consistent returns is better than one that delivers high returns when the markets are up, but wipes out your investment when the markets crash. So, a relative assessment is needed to give a true picture of the fund's performance. This is given in quartile rankings for the past five years. The quartile ranking is simply a division of a particular category of funds into four parts. The top 25 per cent fall in the first quartile, the next 25 per cent in the second quartile, and so on. A fund that has consistently remained in the top quartile is obviously a good choice.
Bear market returns: It will take a long time for equity investors to forget the bear attack of 2008. The bear phase, which began on 8 January 2008, lasted 14 months till 9 March 2009. In this column, we have looked at how the fund performed during these 14 months. This information is especially useful because nearly all funds do well when the markets are on an upswing. It is during a downturn that the true mettle of a fund manager is revealed.
Price and cost
The removal of entry loads has reduced the cost of mutual funds. However, most funds have now introduced an exit load to discourage withdrawals before a year.
Expense ratio: This is what a fund charges you in a year for managing your money. In equity and balanced funds, this can be up to 2.5 per cent.
Minimum initial investment: This is the minimum amount that you can invest in a fund. While this is as low as Rs 500 for ELSS funds, it is generally Rs 5,000 for other equity funds, and Rs 20,000 for debt funds.
