Top Three Ways to Assess Your Funds Performance

Mutual funds are collective investment vehicles that offer substantial capital gains over investments. They are professionally managed by experts, or group of experts who are well-versed with the working of financial markets. They tap lucrative opportunities to earn profits over the underlying investments, and thus guarantee capital appreciation for the amount invested.

Mutual fund's performance plays a key role in determining the return rate of any scheme. It is a crucial factor that investors assess and verify before shortlisting a scheme. So, emphasis is laid on the funds' performance while selecting a scheme.

There are several factors that are known to affect the performance of a scheme.

The top three factors that directly influence the performance include :-

• NAV Rates

NAV stands for Net Asset Value. It is defined as the per unit value of mutual fund scheme. It is calculated by dividing the total asset value of the scheme to the total number of units. Latest Mutual Funds NAV are computed on daily basis. The closing price of the underlying securities is utilized to calculate the NAV of a scheme. Thus, higher the NAV, better is the performance of the fund.

• Yield

This is defined as the income generated by any mutual fund. It is independent of the capital value of the underlying assets. This makes it almost independent off the NAV rates of any scheme. The yield of a scheme is directly dependent on the dividend payments of the underlying securities. Thus, if some of the underlying stocks provide heavy dividend, then the Yield of the scheme will increase significantly.

• Total Gain

This is determined by assessing the performance of a fund for a particular period of time. Generally, investors consider a time frame of 1 month, 3 months, 6 months, 1 year, and 3 years. This gives investors a better picture on the performance of fund.