READING MUTUAL FUND TABLES

READING MF TABLES

There are various ways in which the mutual fund details are explained. There are two main sources for getting regular published information on mutual funds in the country and these are newspapers and financial and investment magazines. In addition several websites give this information. In case of several newspapers, which present daily information on mutual funds there is very little analysis but more of basic information.

DAILY FIGURES

In overall terms there are two ways in which the figures are presented. The first is the way in which the daily figures are given. Here there are a maximum of three figures that are available. Before going to that area one must look at the way in which the names of the schemes are presented. In order to look up the specific scheme the name of that particular scheme will have to be found out. After that it is also necessary to locate the option that one has chosen in the scheme. This means that one has to find out whether there is the growth option that has been chosen or is it the dividend option that has to be chosen. There is only one NAV for the dividend option even though there are two choices in the form of dividend payout and dividend reinvestment. There is also a separate NAV figure for the growth option in the scheme.

Once the option within the scheme has been chosen the next part is to look at the NAV of the scheme. This is the actual value of the scheme that is available however this is not the price at which the units will be available for sale or repurchase. For that one has to look at the repurchase and the sale price. The repurchase price is the price at which the fund buys the units from the investor while the sale price is the price at which the fund sells the units to the investor.

There is a good chance that the repurchase or the sale price will be the same as the NAV that has been declared. This will be the case only when there is no load applicable on either the purchase or the sale of the units. Any load on either side will be witnessed through the different value under the respective head. In some cases the investor has to be alert because exit loads are not mentioned upfront but they are applicable where there is a certain action by the investor in a specific manner. For example there are schemes that say that if the investor sells his units before a year then a 1% exit load will be imposed on the investor. This figure will not be seen in the price that is witnessed in the papers but it will still be applicable to the investor when they go out to transact and hence one has to be alert and aware of this part of the transaction.

ADDITIONAL ANALYSIS

When it comes to magazines or even additional analysis as far as the newspapers are concerned there will be the return figures for the schemes. The return figures will be say for a month, three months, six months, year, 3 years and even 5 years. The time period chosen by a particular publication will differ and hence one has to see which is the one chosen by the publication. The general rule that is followed in most cases where such figures are mentioned is that the return figures for the scheme upto a year are absolute while the figures above a year are compounded annually. This is not a rule but a general observation and hence several publications might not follow this rule.

When the figures are absolute it means that this is the actual return that has been earned by the investor if the money had been put in the scheme at the start of the particular period. When the figure is compounded it means that this is the annual rate of earning that grows compounded for the number of years mentioned.

There are several other columns that could be part of the tables that comprise the figures for various mutual funds. A few of such columns and their meanings are covered here. One such figure is the standard deviation of the scheme, which is the extent to which the figure moves from the average of the schemes. This figures shows how volatile is the schemes performance and higher the standard deviation witnessed the higher is the volatility in the scheme.

Another figure that is also commonly used is the beta of the scheme. The beat of the scheme shows by how much the scheme NAV moves in relation to a movement in the overall market. When the beta is positive it means that a rise in the market will be accompanied by a rise in the NAV of the scheme. A figure of 1 means that the NAV moves in exact tandem with the market while a higher figure shows higher reaction and a lower figure a lower movement.


RATIOS

Sharpe ratio is a commonly used figure and this shows the risk adjusted return of a scheme. It is calculated as the return of the scheme less the return from the risk free securities divided by the standard deviation of the scheme. This shows the extra return being generated by the scheme for the risk that is being taken in terms of the standard deviation or volatility in the scheme. This ratio will help analyst to understand the reason for the return in the scheme. The idea behind looking at the Sharpe ratio is to see whether higher or excess returns earned by a particular scheme comes with higher return or not.

Sharpe ratio = Return of the scheme- Risk free rate of return
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Standard deviation of the scheme

There is a variation of the Sharpe ratio, which is the Sortino ratio. Here the return against only the downward price volatility is calculated, which means that in the denominator where there is the standard deviation figure only the figure for the downside is calculated. It measures the excess return to bad volatility where the volatility on the downside is considered as bad volatility. A higher ratio here means that there is low chance of a large loss in the scheme.

Sortino Ratio = Return of the scheme – Risk free rate of return
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Standard deviation of the scheme on the
Downside