📘 How to Read a Mutual Fund's Factsheet: A Complete Guide for Investors

When investing in mutual funds, a factsheet is your most reliable monthly report card. It gives you a snapshot of the fund’s performance, portfolio allocation, risk metrics, and key ratios that help you make informed investment decisions.

But many investors find factsheets confusing. Let’s simplify it step by step.

1️⃣ What is a Fund Factsheet?

A mutual fund factsheet is a document released monthly by Asset Management Companies (AMCs). It contains:

• Fund objectives

• Portfolio composition

• Performance history

• Expense ratio & load structure

• Risk-return ratios

2️⃣ Key Sections in a Factsheet

🔹 a) Basic Fund Information

• Fund Name & Category – e.g., Large Cap Fund, Balanced Advantage Fund.

• Inception Date – how long the fund has been active.

• Fund Manager’s details – track record & experience.

• Benchmark Index – helps compare fund performance with the market.

  
  

🔹 b) Portfolio Allocation

• Equity vs Debt split (for hybrid funds).

• Sector Allocation – e.g., 30% Banking, 15% IT.

• Top Holdings – list of top 10 companies where the fund invests.

Example of Pie chart showing example of sector allocation.

3️⃣ Performance Snapshot

• Absolute Returns – point-to-point returns (e.g., 1 year, 3 years).

• CAGR (Compounded Annual Growth Rate) – how your money has grown annually.

• Rolling Returns – consistency of performance over different periods.

  
  
  
  

  

  example of Line graph comparing fund vs benchmark performance over 5 years.

  
  

  4️⃣ Key Ratios to Understand a Factsheet

  
  

Here’s where most investors get confused. Ratios tell you risk-adjusted returns and volatility levels of a fund.

Ratio	What it Means	Investor Takeaway
Beta (β)	Measures volatility compared to the benchmark. Beta = 1 (same risk as market), >1 (more volatile), <1 (less volatile).	Choose lower Beta for stable returns.
Sharpe Ratio	Return earned per unit of risk (Standard Deviation). Higher = Better.	Good for comparing funds in same category.
Sortino Ratio	Like Sharpe, but only considers downside risk. Higher = Better.	Helps identify funds with less downside risk.
Alpha (α)	Excess return over benchmark. Positive Alpha = outperformance.	Shows fund manager’s skill.
Standard Deviation (σ)	Measures how much returns fluctuate. Lower = more stable.	Helps risk-averse investors pick steady funds.
R-Squared (R²)	Correlation with benchmark (0–100%). High R² = fund closely follows index.	Useful for active vs passive strategy check.
Expense Ratio	Annual cost charged by AMC. Lower = more return in your pocket.	Direct Plans usually have lower expense ratios.

5️⃣ Riskometer & Suitability

Every factsheet includes a Riskometer (from SEBI). It shows whether the fund is:

• Low Risk ✅ (Debt, Liquid funds)

• Moderate Risk ⚖️ (Hybrid funds)

• High Risk 🚀 (Equity, Sectoral funds)

6️⃣ How to Use a Factsheet Effectively

✔ Compare fund’s ratios with peers & benchmark

✔ Focus on consistency, not just past returns

✔ Align fund’s risk level with your investment goals & horizon

✔ Don’t chase only the highest returns—look at risk-adjusted performance

🔑 Final Takeaway

A factsheet is not just numbers—it’s a roadmap to smart investing. By learning to read ratios like Beta, Sharpe, Sortino, Alpha, you can evaluate whether a fund truly matches your risk appetite and financial goals. Call us at - 9307218766 or Drop us a message or explore our tools to see your future wealth unfold.

Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.