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Basis of selection of funds

Our basis for selection of funds being shared with the clients is scientific and Qualitative in nature which includes non standardized parameters like:

  • Consistency in Performance
    The potential of any fund is determined by its consistency maintained in the previous years and how the fund has managed to be on top and perform well by delivering excellent and consistent returns despite the benchmark and market cycles faced. The fund’s three and five-year returns must be checked before concluding to its consistency.




  • Standard Deviation:
    Standard deviation measures the dispersion of data from its mean. In finance, standard deviation is applied to the annual rate of return of an investment to measure its volatility (risk). A volatile stock would have a high standard deviation. With mutual funds, the standard deviation tells us how much the return on a fund is deviating from the expected returns based on its historical performance.



  • Sharpe ratio: 
    Measures risk-adjusted performance. It is calculated by subtracting the risk-free rate of return from the rate of return for an investment and dividing the result by the investment’s standard deviation of its return. The Sharpe ratio tells investors whether an investment’s returns are due to wise investment decisions or the result of excess risk. This measurement is useful because while one portfolio or security may generate higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater an investment’s Sharpe ratio, the better its risk-adjusted performance.



  • Size of the AUM:
    The AUM of a mutual fund scheme refers to the value of assets under its management. In other words, it simply means how many subscriptions the scheme has received. In the equity category, especially in small cap funds, a large AUM can make it hard for the fund to enter and exit companies. On the other hand, larger sizes of AUM is favourable in case of liquid and short term debt funds as it makes the fund less vulnerable to redemptions made by large investors.



  • Credentials of the AMC:
    An Asset Management Company (AMC), also known as fund house, is the company which manages a mutual fund scheme. For example, HDFC Mutual Fund is the name of the AMC which manages schemes like HDFC Equity, HDFC Top 100 or HDFC Small Cap Fund. Many decisions are made at AMC level by the Chief Investment Officer (CIO) of the AMC. A poorly selected stock is often present in several schemes owned by an AMC, because the selection has been made at AMC level. Thus, it is important to check the track record of an AMC while selecting a mutual fund scheme.



  • Fund Manager’s history and track record- Another important factor to be considered while selecting a mutual fund is the performance of its fund manager and how long he/she has been at its helm. For this, an investor should look at the fund manager’s experience with the fund in question and with other funds currently managed or managed in the past by him/her.




  • Expense Ratio:
    The expense ratio of a fund reflects the fee charged by a AMC for the administration, management, promotion and distribution of a mutual fund. All expenses incurred in the running of the fund are included in this figure. This figure is capped at 2.25% of the total fund assets by capital markets regulator SEBI (Securities and Exchange Board of India)