Dec 21, 2016 3 min read

Confused Between Two Funds? Compare Now & Make a Smart Choice

Making comparisons between various mutual fund programmes requires special skills and expertise. Here, we have provided you with the simplest solution for the same.
Do you find mutual fund schemes confusing? Don’t you understand which plan is appropriate for you? If yes, then you are at the right place. Here we have provided the simplest way to make the best comparison of schemes and choose the one for your investment portfolio.

Selection of anything is the most crucial decision one has to make. And when it is related to money which involves high risk, it becomes even more challenging. Before taking the final decision of investing your hard-earned money into any strategy, it is a must to evaluate every scheme and then opt for a plan as per your requirement.

There are various basis to make comparison between funds and some of the important ones are:

  • Credit Rating: There are rating agencies like CRISIL which use some methodology to rate the investment programmes as per their performance and credibility. You must take a glance over the rating of the scheme to choose the best fund.
  • Sharpe Ratio: This indicates the per-unit return of the scheme after taking the risk associated with the investment. It is calculated with the formula:
    (Return-Risk-Free Return)÷Standard Deviation
    You can evaluate the same to measure the returns offered by the scheme.
  • Maturity Period: As per your risk-bearing capacity, you must consider the average maturity of the plan, because it is directly linked with the market moves and fluctuations in returns. If you can bear high risk then long-term investment can also be a good option for you. So it’s up to you how long you wish to stay invested with risk.
  • Expense Ratio: This indicates the average expenses that a fund shall charge from the investor in a year. Moreover, it adds to the cost of investment. You can measure the same and get informed about the total cost of investing in a particular scheme.
  • Standard Deviation: This is a measure of the fluctuations in a fund’s returns which indicates the risk associated with the funds portfolio. Lower deviation is always better for the investors. So, you can take consideration of the same while making comparison.
  • Exit Load: This is the penalty imposed by the mutual fund for leaving the scheme. You must confirm the charges associated with schemes you are going to choose so that it does not increase your expenses.
  • Compare Funds of Same Category: One can make the right choice of fund only if s(he) compares the funds of the same class. It would help him/her to make a clear comparison and earn better results.
  • Portfolio Turnover Ratio: This ratio calculates how frequently a mutual fund programme trades (buys or sells) in its portfolio. It is lower in case of the passively-managed schemes, and can rise up to 500% for actively-managed equity schemes.

These are some of the considerations which must be kept in mind while comparing two funds for final selection. Making a comparison is proved to be appreciable for the investors only if he/she considers the alternatives. We, at MySIPonline, provide a planned way of comparing funds. You just need to select any two-to-three funds and we will give a brief comparison between them to help you make the best decision.

Compare Funds is an advanced feature provided in the solutions which assists in making wise choice as per the requirement. If you need any further assistance in using the tool or have a query related to mutual fund investments, you must get in touch with our advisors team. They would help you to become an informed investor.