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How To Review Mutual Funds?

Want to learn how to review mutual fund performance? Read this article for the metrics to evaluate a mutual fund & things to keep in mind while buying a mutual fund

In recent years, India has been on the bullish side where the markets are concerned, and as more and more people rush to invest in equity and the funds thereof, there is an urgent need to review any potential investment. Investors have grown pretty savvy in recent times, and the requirement of reviewing your future investments, especially making it a habi to review mutual funds before you invest, is seen by many as vital. 

However, figuring out which is the right match for you, as an investor, may be challenging, as there are a gamut of good fund houses you can select from. An easy way to thin down your search is to clearly define your unique financial goals. The reasons for your investment in mutual funds could vary from portfolio diversification to building a corpus for retirement. You should also be aware of your risk appetite while you invest. With offerings aplenty, this guide might just put you on the right track to make a great mutual fund choice.

Making a List of Mutual Funds to Review

Before you decide to review mutual funds on the market, make a list of your financial aims and the time span you wish to achieve them in, with your appetite for risk duly considered. Once this is done, you can go ahead and opt for a category of mutual funds. There are broadly three kinds that you may invest in: 

  1. Equity Mutual Funds - These funds invest your capital in the stocks of companies that are listed on exchanges. Such vehicles typically carry a high risk, but may also give you rewards in abundance. 
  2. Debt Mutual Funds - Such funds allocate your wealth to invest in securities of a fixed income nature, like government securities, bonds, etc. These carry a lower degree of risk than mutual funds that invest a high amount of capital in equity. However, returns may not be substantially high. 
  3. Hybrid Mutual Funds - If you wish to play moderately safe and still want the potential for good gains, you can choose a mutual fund that invests in both debt and equity. 

As you review mutual funds, you may well come across a range of different subtypes, like ELSS (equity linked savings schemes) funds for saving tax, and index funds that aim to resemble indexes of the markets like the NIFTY 50. 

Evaluating Historical Mutual Fund Performance

Logically, the next thing that you should do when you are deciding how to review a mutual fund portfolio is to study any given fund’s past performance. This will have some bearing on the performance of the fund in the future. This also helps you to compare funds to each other, taking into consideration the average rate of returns in a particular category of funds. Furthermore, you should be aware of two crucial points here. One point to note is that any indication of past returns cannot guarantee those of the future. The second point of note is to ensure, when you make a comparison, that you compare “apples” to “apples”. Simply put, this means that your analysis of returns should be aligned with your investment time frame. 

Evaluating the Performance of Mutual Funds against Indexes

When you wish to have some idea of how to review mutual fund performance, you can always explore the evaluation of a mutual fund’s history against indexes of note. Indexes such as the NIFTY 50, BSE 200, and BSE SENSEX are benchmarks. Major fund performances are assessed on the basis of comparison with a benchmark. Comparing a range of timelines against benchmarks and peers lets you have a helpful insight into funds. A fund which is managed well typically won’t dip too low during any market downturns. 

Evaluating the Expense Ratio of Mutual Funds

You should know that when you invest in a mutual fund, the fund house charges investors a fee for the management of the fund. This is usually a percentage of your investment, and is known as the expense ratio. Obviously, if the expense ratio or ER is low, the better it is for the investor. In case investors make investments directly with the fund house, ERs will be low as compared to investment via a broker or financial advisor. A lower ER translates to more savings in the long run. 

Evaluating the Lock-In Period & Exit Load 

While it is important to review mutual funds from different aspects and with a range of factors in mind, the lock-in period and exit load of any fund are crucial. Consider the lock-in period first. For example, ELSS funds have 3-year lock-in periods. In the event you wish to redeem your investment within a year, such funds will not suit you. Hence, your investment goals should be your guiding light ultimately. The other important point of note is the exit load of a fund. This is an extra fee if you wish to redeem an investment in advance of a certain date. Hence, you must make sure exit loads are kept at zero, or at the very least, quite low. 

Evaluating Risk Levels of Mutual Funds 

Knowing how to review a mutual fund portfolio is not a challenge if you go about the process systematically. One of the most vital things to examine is the risk level of mutual funds. Invariably, returns are linked to risks. A convenient way to check for risk is to track the consistency of the return rate. Seasoned investors may even wish to compare ratios like Sharpe ratios. These are very useful to assess the adjusted-risk performance of any given mutual fund. 


Making a comprehensive review of mutual funds is a good way to start your path towards investment in one of the most popular investment channels today - mutual funds. The process to review mutual funds is not tedious if you go about it with patience and planning. Rushing in to invest in any instrument or product is never a good idea, and you must act with care and diligence while assessing mutual funds too. 


  1. Can the historical performance of any mutual fund give you assured returns in the future?

While you may do some research on a fund’s past performance, results may not indicate the same level of performance in the future. In the case of mutual funds, you have to review mutual funds from many angles to find the right match for you. 

  1. What are the aspects of mutual funds to consider while doing a review of mutual funds?

There are several aspects of mutual funds to consider while reviewing which mutual fund you should invest in. These primarily include your investment goal, risk appetite, the mutual fund category, the expense ratio, and other relevant factors. 

  1. Why is it important to do a review of mutual funds?

It is essential to conduct a review of mutual funds before you opt for any one, as this gives you a benchmark to choose a fund that matches your unique requirements. If you wish to be fairly assured of reaching your investment aims, a review is necessary. 

  1. Can anyone help me to do a review of mutual funds?

If you need external guidance on how to review a mutual fund portfolio and decide whether it suits your needs, you can always approach financial planners and advisors which may be available at AMCs and some banks. 

  1. Which is the most important factor to consider while doing a review of mutual funds?

There is no single factor of relevance while doing a mutual fund review. Rather, several factors have an equal amount of weight while choosing a fund, but some may take precedence over others, depending on an investor’s mindset/requirements. The first thing to do is to determine individual financial goals. 

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