In order to decide which Mutual Funds suits your financial objective, there are a few key metrics that can help with the decision making process. 

Investors need to carefully analyze the following metrics and understand each of them before investing their money. On Tickertape, we have taken into consideration the 6 main metrics that are fundamental to analyze your portfolio.


        1.    Expense Ratio - In simple terms, the expense ratio can be defined as the annual fee charged by a given mutual fund scheme to manage the money invested on your behalf. This is similar to a maintenance fee charged by a house owner to their tenants. Under the Expense ratio, charges are typically broken down from fund managers' fee to expenditures incurred to run the fund administration. A lower ratio usually indicates higher profitability and a higher ratio means lower profits for an individual investor. 


        2. PE Ratio Is the average of PE ratios of the all the stocks present in the fund's portfolio.

       

        3. Sharpe Ratio - The Sharpe ratio is ideally used to gauge the performance of an investment after adjusting its risk. It comes down to maximizing your returns and reducing volatility. For example, if the annual return for a portfolio is 10% and had less or zero volatility, it is said to have an infinite (undefined) Sharpe ratio. This ratio is named after the famous American Economist, William Sharpe. The formula for this ratio is given below, Since it is practically impossible to have zero volatility, it is significant for the expected returns to increase helping with the increasing risk factor. 


Sharpe Ratio = (Rx – Rf) / StdDev Rx


  • Rx = Expected portfolio return
  • Rf = Risk-free rate of return
  • StdDev Rx = Standard deviation of portfolio return (or, volatility)


        4. Cat Exp Ratio -  Is the average of expense ratios of all the mutual fund schemes in the category. It is helpful in comparing a mutual funds expense ratio with it's category.


        5. Cat PE Ratio Is the average of PE ratios of all the mutual fund schemes in the category.


        6. Cat Sharpe Ratio  - Is the average of Sharpe ratios of all the mutual fund schemes in the category.