Compare Mutual Fund Schemes in Detail

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Why There is a Need to Compare Mutual Funds?

Selecting a Mutual Funds to invest in is quite a broad decision for investors. With over 2000 Mutual Funds available in India across Equity, Debt, and Hybrid categories, selecting the right one is crucial for long-term financial goals. Comparing different types of mutual funds can help investors make informed investment decisions.

How to Compare Mutual Funds?

Here is a list of the parameters most frequently used when comparing mutual funds:

Return Performance: This includes analysing returns over various periods like 1 year, 3 years, and 5 years to compare different mutual fund schemes effectively.
Benchmark Performance: It's important to assess how well a mutual fund performs compared to a designated benchmark index. This comparison helps investors understand whether the fund has outperformed or underperformed compared to its peers.
Cost Efficiency: The expense ratio is the annual fee a fund house charges for managing investments. Analyzing a fund's expense ratio is essential because it directly impacts your investment return. Lower expense ratios mean you keep more of your money, while higher ones mean more of your money goes to fees.
Measure Risk: It is important to look at each Mutual fund's risk profile by considering factors such as how much its value fluctuates and its investments across different types of assets. This examination ensures that the fund matches with the investor's risk tolerance and financial goals.
Portfolio Information: Analysing a fund's portfolio composition reveals its investment strategy and how diversified it is. This includes examining the sectors and asset types in which the fund invests, as well as the quality of those investments. It also helps to determine if the fund aligns with your investment goals and preferences.

When comparing two mutual funds Schemes, consider these key steps: analyse returns, compare benchmarks, assess costs, evaluate risks, and review portfolio compositions to match your investment goals.

How to Compare Equity Mutual Funds the Right Way?

Equity Mutual Funds primarily invest in stocks and shares of publicly traded companies. They offer the potential for high growth but also carry higher volatility compared to debt or hybrid funds. When comparing Equity Mutual Funds, it's important to consider the following factors:

Fund Categories: Equity funds can be classified based on market capitalization (large-cap, mid-cap, small-cap), investment strategy (growth, value, blend), or sector-specific focus (technology, pharmaceuticals, banking, etc.). Understanding these categories to understand of fund's risk and return potential.
Performance History: Although past performance doesn't guarantee future results, it shows the fund's consistency and how it has performed across different market conditions.
Expense Ratio: The expense ratio represents the cost of managing the fund, which impacts investor returns. Higher net returns for investors are often related to lower expenditure ratios.

Risk Analysis: Equity funds generally have higher risks than debt funds, with variations in risk levels among different types of equity funds. For example, small cap funds may be riskier than large cap funds.

Fund Manager’s Track Records: The experience and skill of the fund manager play an important role in fund performance. Evaluating their track record, investment approach, and performance during market fluctuations is essential.

Investment Strategy: Active and passive management strategies impact fund returns and expenses. Actively managed funds seek to outperform the market at a higher charge, while passively managed funds attempt to match index performance at a lower cost.

Finally, the Best Equity Mutual Fund decision depends on your investing goals, risk tolerance, and time horizon. Always undertake careful research and proper analysis before making an investment choice.

How to Compare Debt Mutual Funds?

Debt funds primarily invest in fixed income assets such as bonds, government securities, corporate debentures, and money market instruments. They typically offer lower risk compared to equity funds, aiming for stable yet modest returns. When thinking about Debt Mutual Funds, consider these key factors:

Types of Debt Funds: There are different categories like liquid funds, short-term, long-term, gilt funds, and corporate bond funds. The risk and possible returns for each category depend on the maturity and types of securities they hold.
Interest Rate Sensitivity: Debt fund prices move in the opposite direction when interest rates fluctuate. Longer maturity periods make funds more sensitive to these changes, which are measured by duration.
Credit Quality: Debt funds invest in securities that have been rated by credit organizations. Higher-rated securities are less likely to go into default but might offer lower returns, and lower-rated assets have a higher risk but possibly higher return.

Yield to Maturity (YTM): YTM is the projected return if the fund is kept to maturity, providing all payments are paid according to schedule. A higher YTM signifies more potential rewards.
Performance History: Past performance reveals how the fund has handled risk and returns over time, but it does not guarantee future success.
Expense Ratio: The expense ratio represents the fund's management expenses. Lower expenditures often mean larger net returns for investors.

Fund Manager Expertise: The fund manager's expertise and competence in managing interest rate and credit risks are essential to fund success.

Picking the right debt fund depends on how well it fits your financial goals, how much risk you're comfortable with, and how long you plan to invest. Before making a decision, make sure to conduct detailed research.

How to Compare Hybrid Mutual Funds?

Hybrid funds combine both equity and debt investments, aiming to balance risk and potential returns. They offer growth opportunities through equities and stability through debt instruments. When analysing Hybrid Mutual Funds, consider the following factors:

Asset Allocation: Hybrid funds blend investments in both equity and debt. Review the fund's allocation to better understand its strategy and the balance it aims to achieve.

Fund Types: There are different types of hybrid funds such as balanced, aggressive, and conservative hybrids. Understanding the fund's type may help you analyse its risk and return characteristics.

Performance History: Review how the fund has performed in different market conditions. Past performance doesn't guarantee future results but can indicate the fund's dependability.
Risk Assessment: Compare the fund's risk level to your personal risk tolerance. While hybrid funds are generally less volatile than pure equity funds, their risk can vary based on their equity-debt allocation.

The Ratio of Expenses: Expense ratio represents the cost of managing the fund. Lower expenditures may boost total profits for investors.

Fund Manager: The fund manager's expertise is important since they actively manage both equity and debt components. Look at their track record of handling hybrid funds.

When evaluating hybrid funds, make sure the fund's attributes match your financial goals, risk tolerance, and investing period.

Common Mistakes to Avoid while Comparing Mutual Funds?

When Comparing mutual funds, watch out for these typical mistakes:

Not Considering Investment Objectives: It's important to select funds that fit your financial goals. The best fund choice depends on your specific goals, how much risk you can handle, and how long you plan to invest.
Chasing Past Performance: Remember, how well a fund did in the past doesn't guarantee future results.
Ignoring Risk: Higher potential gains often mean higher risk. Before doing any Mutual Fund comparison make sure a fund's risk level matches what you're comfortable with.
Overlooking Fees: High fees can eat into your returns. Always consider the total costs of investing.

When comparing mutual funds, avoid these mistakes. To find the Best mutual funds, pick one that matches your goals, handles risk well, and has low fees.

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Trailing Lumpsum Returns

SIP Return Analysis

Rolling Lumpsum Returns

Risk Management

Fund Managers

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Sector Allocation