InvestorQ : What are the criteria for ranking funds. How does an investor be alert on this?
shivangi Arora made post

What are the criteria for ranking funds. How does an investor be alert on this?

ramya Bhaskaran answered.
11 months ago
Generally, financial platforms /service providers rank mutual fund schemes according to returns. It thus becomes very important for us to understand what our specific requirements are and match them with fund schemes that work on a similar trajectory.

While researching mutual funds, it’s a very good point of reference to assimilate schemes that are among the higher-ranked ones across platforms. Largely the best performing schemes will be similar across most platforms, it's just the ranks that may vary. Use this just as a stepping stone to finding the schemes that fit your portfolio perfectly.

If you want to filter mutual fund schemes in-depth, these are the variables you need to look into:
i. Experience of the fund management team: The more experienced the fund manager, the higher chances of generating alpha (returns over and above the benchmark).

ii. History of the fund house: It is important to do a check on the fund house, history of existence, track record across schemes before selecting a scheme.

iii. Past performance: Knowing how a fund has performed in the past can’t tell you how the fund will perform in the future, but it can tell you how the fund compares to other funds with the same investment objective in similar time periods.

iv. Size of the fund: Invest in funds that are neither too big nor too small. Somewhere in the range of Rs3,000-10,000 crore should be sufficient. This is because small funds tend to have high fees. Large funds tend to have a problem allocating money efficiently.

v. Investment objective: Every mutual fund scheme, irrespective of the category - whether equity or debt has an investment objective. It is this investment objective that entails them investing in various asset classes in defined proportions. As investors, it is imperative to check the investment objective of the respective mutual fund scheme, and thereby see whether it matches your end goal. For example, if you have an objective of capital appreciation with a long-term investment horizon in mind and are willing to take risks, then equity-oriented mutual funds will work better for you.