Mutual Funds (MFs) have come a long way in India. But not really when it comes to understanding the performance of various Mutual Fund schemes that are existent in the country today. A lay investor, today, would mainly look at the NAV movement of a scheme to decipher its performance before going ahead with an investment decision. While NAV and its movements can be considered as ONE of the yardsticks to measure the performance any MF scheme, it cannot, per se, be the only parameter for judgement to invest in MFs.

A discerning investor would do well to take a look at other factors that may affect his investment decisions:

First, before an investor burns his hands by investing in a non-performing scheme, he should identify as to what his investment objectives are, namely - short term gains, long term capital gains, continual income generation etc.

Second, the performance of a scheme over its lifetime would be another key criterion. This analysis should be relative to the performance of the scheme vis-à-vis the market vagaries. Windfall gains in times of bull phases and abysmal returns in times of bear phases only indicate the susceptibility/vulnerability of the Mutual fund scheme and its underlying portfolio to the market conditions.

Third, the income generating capability of the fund by means of declaration of dividends etc. True to the financial adage, maximization of wealth and minimization of risk, the dividend history of a fund would certainly be a reckoning benchmark while assessing its performance.

Fourth, the underlying portfolio of a particular scheme would certainly be a decisive factor. A fund that is closely following the market conditions/changes would do well to be in sync with the ever-changing global market trends and change its portfolio structure to be in tune with investor expectations.

Fifth, a fund’s adherence to its investment objectives, as stated in the offer document, would do a whole world of good to the investing fraternity.

Last but not the least, a peep into the fund manager’s credentials (like his experience/expertise etc) would certainly add pep to an investment decision.