How to Read a Mutual Fund Factsheet — 10 Numbers That Actually Matter
Every AMC publishes a monthly factsheet for each scheme — a 2-3 page document packed with data about the fund's portfolio, performance, risk metrics, and costs. Yet 90% of Indian investors have never read a factsheet. They invest based on star ratings or a friend's recommendation, then wonder why their fund underperforms. A factsheet is like a medical report for your money — it tells you exactly what the fund owns, how much risk it takes, how expensive it is, and whether the fund manager is doing their job. This guide teaches you to read any factsheet in under 5 minutes by focusing on the 10 numbers that actually predict future performance.
By Ojasvi Malik
The 10 Numbers — Quick Reference
These are the only numbers you need from any mutual fund factsheet. Everything else is marketing fluff.
| Number | What It Tells You | Good Range (Equity) | Red Flag |
|---|---|---|---|
| Expense Ratio (TER) | Annual cost deducted from NAV | 0.3-0.8% (Direct) | Above 1.2% |
| AUM | Fund size | ₹5,000-50,000 Cr | Below ₹500 Cr or above ₹80,000 Cr |
| Sharpe Ratio | Return per unit of risk | Above 0.8 | Below 0.5 |
| Standard Deviation | Volatility of returns | 12-18% | Above 22% (too volatile) |
| Portfolio Turnover | How often holdings change | 20-60% | Above 100% (excessive churning) |
| Top 10 Holdings % | Concentration risk | 35-55% | Above 65% (too concentrated) |
| Benchmark Alpha | Return above benchmark | Positive (any timeframe) | Negative over 3Y and 5Y |
| Fund Manager Tenure | Experience and consistency | 3+ years | Changed in last 1 year |
| Beta | Sensitivity to market movements | 0.8-1.1 | Above 1.3 (amplifies losses) |
| Sector Allocation | Diversification across sectors | Top sector below 30% | Any sector above 40% |
AUM — The Goldilocks Zone
AUM (Assets Under Management) is the total money managed by the fund. Too small (below ₹500 Cr) means the fund may struggle with liquidity — selling large positions in mid/small caps becomes difficult. Too large (above ₹70,000 Cr) creates the opposite problem — the fund becomes so big that it can only buy large-cap stocks, effectively becoming an expensive index fund. For large-cap funds, high AUM is fine. For mid-cap and small-cap funds, AUM above ₹30,000 Cr starts hurting agility. The sweet spot for most actively managed equity funds is ₹5,000-40,000 Cr.
Sharpe Ratio — The Most Underrated Metric
Sharpe ratio measures excess return (above risk-free rate) per unit of volatility. A Sharpe of 1.0 means the fund earned 1% excess return for every 1% of volatility it took. A fund returning 18% with a Sharpe of 0.6 is actually worse risk-adjusted than a fund returning 14% with a Sharpe of 1.1 — the second fund delivered more return per unit of risk. Always compare Sharpe ratios within the same category (large-cap vs large-cap, not large-cap vs small-cap) and over 3-year periods for statistical significance.
Portfolio Turnover — The Hidden Cost
Portfolio turnover tells you how frequently the fund manager buys and sells stocks. A 50% turnover means half the portfolio was replaced in a year. High turnover (above 100%) signals excessive trading, which generates transaction costs, impact costs, and short-term capital gains tax — none of which appear in the expense ratio. Low turnover (below 30%) often indicates a buy-and-hold conviction-based approach, which historically outperforms high-churn strategies in Indian markets. Warren Buffett funds typically have 5-10% turnover. Most Indian large-cap funds run 30-60%.
lightbulbKey Takeaways
- ✓Focus on 10 numbers: TER, AUM, Sharpe ratio, standard deviation, turnover, top 10 concentration, alpha, manager tenure, beta, sector allocation
- ✓Sharpe ratio above 0.8 means the fund generates good returns for the risk it takes — compare within same category only
- ✓Portfolio turnover above 100% is a red flag — excessive trading erodes returns through hidden transaction and tax costs
- ✓AUM sweet spot is ₹5,000-40,000 Cr for active equity funds — too small or too large creates problems
- ✓Fund manager tenure under 1 year means past performance is irrelevant — that was a different manager's track record
VMFS Pro — Coming Soon
Portfolio overlap detection, LTCG tax calculator, fund scoring, and advanced analytics.
Frequently Asked Questions
Where can I download a mutual fund factsheet?expand_more
How often should I check a fund's factsheet?expand_more
What if my fund's manager recently changed?expand_more
Disclaimer: This article is for educational and informational purposes only. It does NOT constitute investment advice. Return data shown is historical and past performance is not indicative of future results. Vijay Malik Financial Services is an AMFI-registered Mutual Fund Distributor (ARN-317605) and is NOT a SEBI-registered Investment Adviser. Please consult a qualified financial advisor before making investment decisions.