Reading a Mutual Fund Fact Sheet Without Getting Lost

The fact sheet is a monthly publication covering all schemes of one fund house, running to many pages with a page or half a page for each scheme. It is on every fund house website, usually under a literature or downloads section, and it costs nothing.

It is a different document from the scheme information document, which is the detailed legal one you receive once and rarely revisit. The fact sheet is the regular update: what the scheme currently holds, what it currently costs, and how it has done against its stated reference.

If you hold schemes from three fund houses, that is three documents a month. Nobody reads them all, and nobody needs to. Once a year for each scheme is plenty.

Every scheme page lists its holdings, usually the largest ones by weight, along with how the portfolio is split across sectors.

This is where you find out what you actually own, and it is regularly a surprise. Two schemes with different names from different fund houses often hold much the same companies at the top, which means somebody holding both has less spread than they believe. Our page on portfolio rebalancing covers what to do when that becomes visible.

The other thing to look at is the concentration: how much sits in the top few holdings and in the largest sector. A scheme with a heavy weight in one sector behaves differently from a broadly spread one, whatever category name it carries.

The performance table shows the scheme over several periods with its stated benchmark next to it, which is the whole reason the table is more honest than most numbers you will see quoted.

Read across rather than down. The scheme figure alone tells you about the period. The scheme figure alongside its benchmark tells you something about the scheme, and our page on the mutual fund benchmark explains why the choice of reference matters so much.

The table also has a fixed line at the bottom of every fact sheet in the industry, saying past performance may or may not be sustained. It is there because it is true, not because it is a formality.

A cluster of small entries usually sits at the edge of each scheme page and several of them are worth more attention than their size suggests.

• Fund manager and since when. A record built by somebody who left two years ago belongs to them, not to the scheme.
• Category and inception date. A scheme launched during a favourable stretch has a record covering only part of a cycle.
• Assets under management. Useful as context, particularly for schemes investing in smaller companies where size affects how easily positions can be adjusted.
• Expense ratio, stated separately for direct and regular plans, which our pages on the expense ratio and direct versus regular plans cover.
• NAV per plan and option, which is where people first notice that the same scheme carries different NAVs for growth and IDCW, explained on our page on growth versus IDCW.
• Exit load and minimum amounts, which decide what a withdrawal costs and what a fresh instalment must be.

Each scheme page carries a riskometer showing where the scheme sits on a fixed scale, explained on our page about the riskometer. It is a category-level indication rather than a measure of how much you might lose.

Alongside it you will often find a set of ratios: standard deviation, beta, and various measures of return relative to risk taken. These describe the scheme over a chosen past period and change when the period changes.

For a debt scheme the equivalent numbers are different and matter more to the outcome, since average maturity, duration and the credit profile of the holdings describe two distinct risks. Our page on debt funds sets out what those two are.

Somewhere on the page you will usually find a portfolio turnover figure, and it is one of the more revealing numbers in the document despite being one of the least discussed.

It indicates how much of the portfolio was bought and sold over a period. A high figure means the manager has been changing positions frequently, and a low one means holdings have largely been left alone.

Neither is right or wrong on its own. What it tells you is whether the scheme is being run the way you assumed. Somebody who chose a scheme believing in patient long-term holding, and finds the portfolio turning over rapidly, has learned something about the mismatch between the description and the practice.

Trading also carries costs that sit inside the scheme rather than in the stated expense ratio, so heavy turnover is not free even where it does not show up in the headline charge.

You do not need to read the document. You need five answers from it, once a year, for each scheme you hold.

• Is it still doing what its category says? Compare the holdings with the mandate.
• Is the manager the same person as when you invested?
• How has it gone against its own benchmark over several years, not one?
• What is it charging, and how does that compare with others in the same category?
• Do your schemes overlap more than you assumed?

None of those five questions is about which scheme to buy next, and the answer to all five together is usually that your asset allocation needs a look rather than your scheme list.

If those five are fine, there is nothing to do, which is the answer most years. If you would rather somebody went through them with you against what you actually hold, that is ordinary work here and there is no charge for looking. Get in touch, and our guide on reading your statement covers the other document worth understanding.