How to Read a Mutual Fund Factsheet
Every Asset Management Company (AMC) publishes a monthly Factsheet detailing performance, holdings, risk metrics, and fund manager commentary for all its schemes.
Essential Checklist on a Factsheet
- Fund Objective & Style: Understand whether the fund focuses on growth, value, large-cap, or sectoral opportunities.
- AUM (Assets Under Management): Total money managed by the scheme. Very small AUM or excessively large AUM in small-cap funds requires scrutiny.
- Portfolio Concentration: Check top 10 stock holdings and sector allocation percentage. High concentration increases stock-specific risk.
- Portfolio Turnover Ratio: Indicates how frequently stocks are bought and sold. High turnover means active trading and higher transaction costs.
- Exit Load & Lock-in: Check if early redemptions trigger exit loads (e.g., 1% if redeemed within 1 year).
Red Flags to Watch
- Frequent fund manager changes
- Consistently underperforming the benchmark index over 3+ rolling years
- Unreasonably high turnover ratio in long-term funds