Every mutual fund scheme publishes a factsheet each month. It is free, it is public, and almost nobody reads it. That is unfortunate, because it answers most of the questions investors instead ask on WhatsApp groups.
Start with the portfolio, not the returns
The returns table is the first thing people look at and the least useful. It describes a period that has already happened, under market conditions that will not repeat. The holdings table describes what you actually own today.
In an equity scheme, look at how much sits in the top ten holdings. A scheme with sixty per cent concentrated in ten names behaves very differently from one spread across seventy. Neither is wrong, but you should know which one you hold.
The expense ratio is charged whatever happens
It is deducted from the NAV daily, in good years and bad. Regular and direct plans of the same scheme differ only on this line, and the difference compounds over a long holding period. If you invest through a distributor, you hold the regular plan and the distribution commission is embedded in that ratio.
For debt schemes, two numbers matter most
- Average maturity or Macaulay duration, which tells you how sharply the NAV will react to a change in interest rates
- The credit quality breakdown, which tells you how much of the portfolio sits below the highest rating grades
A short duration fund holding mostly AAA paper and a credit risk fund holding predominantly AA and below are both debt funds. They will not behave alike when credit markets turn.
Check the fund manager tenure
If a scheme's track record spans eight years but the current manager took charge fourteen months ago, the record largely belongs to someone else. This appears in small print on the same page as the returns table.
None of this tells you what to buy. It tells you what you are holding, which is a more useful thing to know and one nobody else will find out for you.
