A definitive guide to compare mutual fund schemes

A definitive guide to compare mutual fund schemes


A mutual fund is one of the great platforms for the investors but choosing a suitable investment plan is not an easy task. It takes a lot of understanding and knowledge to decide on one suitable plan. Besides knowing the policy of mutual funds, you should also check various companies in terms of profit and compare funds. If you are struggling to find a suitable mutual fund scheme among the plenty of options floating in the market, then it is high time for you to end the problem by comparing across various time-frame against or in accordance with the Benchmark Indices. It’s only when you compare funds and their return over time, you know which one is perfect for you.

Before you start with the comparison, here are a few things you should keep in mind:

  • Checking for the return over your investment should be the first step
  • Compare similar fund schemes
  • Compare the return keeping the same time-frame in mind
  • Check a fund on the basis of its own stated benchmark

Now, here is a quick and efficient guide to help you compare fund schemes without any hassle-

Check the return of the investment: The first step is to track the return over the investment so you can check and compare which is better than the rest. It is one of the simplest forms to check which plan would be suitable for you. In order to check the return accurately, you should compare two or more identical plans or else you will end up comparing the return of one year’s result of a plan with that of a three-year plan.

To get an accurate result, put the return of the fund investment over a period of time and check the difference in the percentage of beginning Net Asset value and the ending Net Asset value. This will help you understand the difference on a broad level.

Absolute return: It helps to check how much return over a specific period of time is provided. While using this parameter to calculate and compare the difference, ensure that you compare the right funds’ scheme. If you want to check for the difference of equity fund, compare it with another equity fund only.

Return Benchmark: It is provided by a company that serves as a standard of its returns. It is one of the easiest parameters to compare and the benchmark index is also made mandatory for a fund company by the Securities and Exchange Board of India. A benchmark return is a standard target of a fund company and if it is surpassed, it is considered to have done fairly well.

Tracking time of investment: It is one of the most important parameters if you are trying to compare and understand the difference between investment and its return. The time period is a crucial part over which the return should be compared and evaluated. Needless to mention, while comparing the profit of two or more investments over time, one should pick the fund for an identical time period. Misunderstanding is likely to pop-up when you compare two plans of different duration.

Check the market status: The market status of any fund company has the most important role to play when you want to start with an investment plan. The best way to check for the market status of a company is to compare funds history and check whether it can sufficient past results. However, there might be a few equity funds that have done fairly well and have not been exposed to a declining market. Comparing these equity funds with the plan that has faced varied negative results can be misleading.

Following these simple and effective parameters, you can make your mutual fund investment free of risks. While the above parameters can guide you to select the best scheme, you should always check personal risk tolerance and swings in the portfolio value.

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