We take all the information from Moneycontrol.com but leave the information we should take, you must have also done it somewhere.
After checking the stock price, its fundamentals or technical would not have been seen. Half and incomplete information can prove dangerous for you and for your investment. Seeing the net asset value of a mutual fund and checking the past returns of the fund is not enough. You should see the fundamentals behind the performance of the fund.
I am writing in this blog for the new mutual fund investor, who believes that investing in mutual funds is very risky. Here I have tried to explain in easy language, How do you invest by understanding the fundamentals behind the mutual fund?
There are some simple ratios from which you will be able to know about the risk of mutual funds.
Standard deviation
I have seen people looking at past returns of Mutual Fund to invest in it, But the whole mutual fund advisor and experts refuse to do so. If we do not see past returns, how will we know whether we are right or not?
If you have two mutual funds, one of them is a fund X, the other is a fund Y. And the standard deviation of fund X is less than that of fund Y.So here, the chance is that Fund X Returns more accurate, As compared to fund Y.
Beta Value
People like the equity market to see returns, the more they are afraid to see the volatility of it. Beta is used to determine how volatile the fund is. In Fund A and Fund B, the performance of the low Beta Value Fund is near to the Benchmark. You can say that a low beta fund can be predicated.
Sharpe Ratio
This ratio can be used in this way. How much risk is being taken to generate the return? The higher the value, the lower the risk taken. You have to see in the Mutual Fund’s comparison that which fund is giving a more sharp ratio value.
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Alpha
This shows how much higher returns are generated from the benchmark. If you have invested in a banking fund and its alpha is 1.0, So it has given 1% more returns than Nifty Banking Benchmark. The higher the alpha, Such best the fund.
Great job