If you visit any MF scheme page in one of the consolidation websites like morningstar or valueresearchonline, you would see something like this.
So, this page gives a comparative performance of the fund with respect to the benchmark and category in several time buckets - Year To Date, 1 Month, 1 Year, 3 Years, 5 Years and 10 Years. This also gives the rank of the fund in the category and total number of funds in the category. For instance, in this example, I have taken a mid cap fund. The percentage within one year are absolute return percentage and beyond one year are CAGR - Compounded Annual Growth Rate. You would also see the growth of Rs 10000 in the said period of time.
But, please make sure that you are not selecting an MF scheme to invest in, based on this page. Though this seems to give performance across time periods and across funds, neither is true.
Make a strong point in memory that all the numbers that is quoted in the page are as on one particular day - here it is 18th Nov 2016. And the growth of 10000 or the percentage numbers are what you would have got if you had invested before 1 yr, 3 yr, 5 yr or 10 years. So, it is all hindsight information - may or may not become valid in the years to come. The numbers and ranking will be different if you see the page after a week or month.
And you never know against which funds are you comparing. Some funds may exist in 5 year time period and may not be present in the 10 year time period. i.e it would have commenced between 5 and 10 years ago.
A better benchmarking for a 3 year return would be to get a view of how a 3 year return distribution is across some 3 or 5 years. To get a 5 year of 3-year return data, you would need data points for 8 years and to get a 5 year distribution of 10-year return data, you need data points for 15 years.
So, this page gives a comparative performance of the fund with respect to the benchmark and category in several time buckets - Year To Date, 1 Month, 1 Year, 3 Years, 5 Years and 10 Years. This also gives the rank of the fund in the category and total number of funds in the category. For instance, in this example, I have taken a mid cap fund. The percentage within one year are absolute return percentage and beyond one year are CAGR - Compounded Annual Growth Rate. You would also see the growth of Rs 10000 in the said period of time.
But, please make sure that you are not selecting an MF scheme to invest in, based on this page. Though this seems to give performance across time periods and across funds, neither is true.
Make a strong point in memory that all the numbers that is quoted in the page are as on one particular day - here it is 18th Nov 2016. And the growth of 10000 or the percentage numbers are what you would have got if you had invested before 1 yr, 3 yr, 5 yr or 10 years. So, it is all hindsight information - may or may not become valid in the years to come. The numbers and ranking will be different if you see the page after a week or month.
And you never know against which funds are you comparing. Some funds may exist in 5 year time period and may not be present in the 10 year time period. i.e it would have commenced between 5 and 10 years ago.
A better benchmarking for a 3 year return would be to get a view of how a 3 year return distribution is across some 3 or 5 years. To get a 5 year of 3-year return data, you would need data points for 8 years and to get a 5 year distribution of 10-year return data, you need data points for 15 years.
But isn't it common for stocks & MFs which vary for everyday & by looking at 3, 5, 10 year returns can't we decided on the consistent performance of a fund?
ReplyDeleteNo. You get a snapshot for just a single day.
ReplyDelete