How to track mutual funds?

In the previous article, we discussed what are mutual funds? & taxation in mutual funds. In this article, we will discuss how to track mutual funds.

Making mutual fund investments is just the first step. Once the investment has been made, periodically tracking it becomes equally crucial.  

Most of us seek advice and do our due diligence before choosing our mutual fund investments. However, once things are done, we typically forget about them until a need arises. 

Nearly everything, including your car and health, requires routine maintenance; the same is true for your mutual fund investments.  

While you might not need to regularly monitor your portfolio, it is always a good idea to keep yourself informed of its growth and changes.  

A fund fact sheet will help you to monitor your mutual fund investment easily. It is a progress report for your investments, similar to a report card.  

What is a Fund fact sheet?  

A fund fact sheet is a document that lists every scheme that the AMC or mutual fund managers. It is presented in an easy-to-read manner and is issued monthly by the fund house. It contains the following information:  

  1. Performance of the schemes: It gives the performance information in terms of beta, Sharpe ratio, standard deviation, and the compound annual growth rate or CAGR of the fund.  
  1. The fund factsheet also outlines how your investments have been distributed among different securities. 
  1. Size and investment information for each scheme that the mutual fund managers.  

Reviewing the fact sheet, which is easily accessible on the mutual fund website, is a great way to keep track of your mutual fund holdings. 

how to track mutual funds
source: pixabay

How to track mutual funds performance?  

The mutual fund websites list their net asset value (NAV). The mutual fund company’s chosen index, which is a benchmark for its performance, is available for comparison.  

To know how your fund performs, you should also compare it with other funds in the same category. The performance of a mutual fund scheme cannot be assessed in isolation.  

Some specialized websites track the performance of mutual funds in addition to the fund fact sheets of the schemes. Over a monthly, quarterly, or half-yearly time frame, you can monitor how your scheme is doing compared to its counterpart in the same category.  

It is always good to keep an eye out for the main characteristics and adjustments listed below that could impact the funds’ performance.  

 It is advisable to monitor the portfolio’s turnover and changes in management. 

While it is typical for management to change over time, a frequent change in the fund manager may be a red flag. A change in fund manager frequently results in a shift in investment style.  

To ensure the investment goal is intact in such a situation, it becomes equally necessary to monitor the changes in your portfolio.   

Also, the concern should be raised if your mutual fund portfolio consistently experiences high churn or turnover. High returns do not always equate to increased churn.  

On the contrary, it can cause more significant damage as rising transaction costs eat into your returns. In other circumstances, more churn may also indicate a short-term concentration.  

A short-term emphasis may produce more enormous profits in the near term, but in the long run, it may leave your portfolio weak and exposed to unnecessary risks.  

When looking for the warning signs mentioned above, it is advisable to give any mutual fund scheme at least six months. It might be too soon to assess the scheme’s performance following any adjustment after a month or a quarter.  

Don’t let your fund’s short-term performance outriggers affect you; give it time to establish itself and achieve the investment goal.  

It is good practice to keep track of your mutual fund investments on a timely basis, though not very frequently. 

Consult an expert advisor to get the right plan for you

Add comment

Your email address will not be published.