Mutual Fund GPA

As published in The Telegraph on 31 May 2017

Swatantra Kumar explains:

When your child goes to school, its performance is evaluated.

On the basis of your child’s GPAs and exam marks, you understand his/her performance.

Similarly, your Mutual Funds need to pass certain tests and exams too.

How else will you understand the Fund’s performance? Here’s a look:

- What’s the GPA?

Every MF has to report its returns over the short-, medium-, and long-term. You can double check these return data across news websites or independent analyst sites too.

- What’s the rank?

Simply getting the return figure is not enough. You need to know how its peers did too. For this, you can head to various independent sites like Value Research and CRISIL that rate Funds.

- How much did the First rank-holder get?

It’s the hated question every child hears, but it’s important for Mutual Funds. Compare your Fund’s return data with that of other Funds. This gives you an idea about ‘how well or poor’ your Fund performed. You can also compare with a benchmark like an index.

Important tip:

Consistency is crucial. A one-time outperformance may not be reliable. So look for real outperformance over a longer period of time. Otherwise, your Mutual Fund may not graduate.

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