How to Monitor Mutual Fund Portfolio Performance

Mutual funds are a go-to investment option for many individuals aiming to grow wealth, save taxes, or achieve long-term financial goals. These funds pool money from various investors and invest in securities like stocks (equity funds), bonds (debt funds), or a mix of both. However, investing in a mutual fund isn’t a one-time decision. To truly make the most out of it, you must regularly monitor your mutual fund portfolio’s performance.

In this blog, we will explore how to monitor mutual fund performance, which metrics matter the most, and how to avoid common mistakes in the process.

Why You Can’t Afford to Ignore Mutual Fund Performance?

Investing and forgetting may sound appealing, but it’s not always practical. Market dynamics change. Your financial goals may evolve. And so may the performance of the mutual fund scheme you’ve chosen.

Here’s why tracking matters:

• Ensures goal alignment: Monitoring helps check whether your investments are on track with your target (say, a down payment, child’s education, or retirement).
• Tracks consistency: A fund might show strong returns one year and fall behind later. Keeping an eye on fund performance ensures you don’t stay stuck with underperformers.
• Alerts you to major red flags: Drastic changes in fund manager, portfolio composition, or active management approach can affect returns.

Key Metrics to Evaluate Mutual Fund Performance 

So, how to check mutual fund performance? Here are the key indicators to focus on:

• Absolute and Annualised Returns

Absolute returns show how much your investment has grown in a specific period. Annualised returns give a yearly rate of return. Compare this with benchmark indices and peer funds to evaluate performance.

• Fund’s Benchmark Comparison

Every mutual fund has a benchmark index it tries to outperform. For example, an equity fund may track the Nifty 50. If your fund constantly underperforms its benchmark, that’s a concern.

• Consistency of Returns

A strong one-year return doesn’t guarantee long-term success. Check track record across 3, 5, or even 10 years. This is vital in fund analysis.

• Risk-Adjusted Return

Metrics like the Sharpe Ratio or the Sortino Ratio show how much return the fund is offering per unit of risk. A higher ratio indicates better compensation for the risk taken.

• Expense Ratio

This is the fee charged by the fund house. Even a 1% difference can significantly affect your long-term wealth.

• Portfolio Turnover Ratio

High turnover means frequent buying/selling of securities, which might lead to increased costs and volatility.

Guide to Review Your Mutual Fund Portfolio

• Set a Review Frequency

Once every 6 months is ideal for a balanced approach. Avoid checking every week unless you’re into active management.

• Link Review to Financial Goals

If a fund was chosen for a 5-year goal and you’re just one year in, underperformance may not warrant a switch. However, if the fund has consistently lagged behind peers or benchmark over 3+ years, a change might be needed.

• Compare with Peer Funds

See how other similar funds are performing under the same market conditions. If your fund is consistently lagging behind, dig deeper.

• Rebalance When Necessary

If your equity allocation has risen from 60% to 80% due to a bull market, consider rebalancing to maintain your ideal asset mix.

Best Tools to Stay on Top of Your Fund’s Progress

Thanks to technology, you no longer need a finance degree to track investments. Here are some tools to help you:

• Moneycontrol / Value Research Online – Popular platforms for checking fund’s returns, portfolio changes, and ratings.
• Stock Broking Apps – Apps like Torus Digital offer real-time tracking of your mutual fund investments with ease.
• AMC websites – Direct mutual fund websites offer downloadable account statements and fund updates.

Common Mistakes That Cost You Returns

1. Focusing Only on Recent Returns
   Short-term gains may mislead. Always assess performance over multiple periods.
2. Ignoring Risk Metrics
   Returns don’t tell the whole story. A fund might deliver high returns with extreme volatility.
3. Frequent Switching
   Chasing top performers every year leads to poor returns. Stay consistent unless fundamentals change.
4. Neglecting to Review
   Many investors don’t track performance at all, especially in debt funds. This could derail financial plans if a fund underperforms.

How Torus Digital Makes Monitoring Effortless?

Tired of juggling multiple platforms and trying to interpret complex charts? Torus Digital simplifies mutual fund tracking by offering:

• Customised dashboards based on your goals
• Alerts on fund performance deviation
• Rebalancing suggestions
• In-depth fund analysis using both quantitative and qualitative data

Whether you’re a beginner or a seasoned investor, Torus Digital helps bridge the gap between passive investing and active awareness.

Conclusion

Monitoring your mutual fund portfolio isn’t a luxury, it’s a necessity. With the right tools and understanding of key metrics, you can ensure your money is working efficiently for you. Whether it’s how to check performance of mutual fund, how to tweak your allocation, or how to analyse mutual fund performance, staying involved is key.

You don’t need to check your funds daily, but reviewing them periodically helps you stay aligned with your life goals, market trends, and the ever-evolving investment landscape.