Some questions in selecting mutual funds and expense ratio query

POSTED BY nikhs12345 ON March 7, 2014 7:36 pm COMMENTS (4)

hi all,

I am planning to start investing in mutual funds. Before starting i am trying to gain knowledge about how we can select mutual funds. From manish’s article i come to know that we should look for higher sharpe ratio, Alpha, R-squared should be in between 80 to 90, lower expense ratio. Also read somewhere i think in ashal’s comment that we should compare Calender year return with benchmark and category.

But apart from above I saw some other terms in valueresearchonline.com  like Mean, Std dev, sortino, beta. What is the importance of these terms? What value of these terms i should look for?

Also what should we look for regarding duration Mutual fund duration or its fund manager’s duration?

How much net assets are important?

Also if my understanding is correct the ranking on valueresearch is depending on recent returns. may be in last 1 year. Is this correct? If yes should we give importance to the ranking if one planning to invest for long term.?

and my last question is about expense ratio:

Lets say mutual fund x has expense ratio of 2%. If that mutual fund returns are showing 20% in last 1 year. So what will be the value of my investment if my investment amount is 100. Is it 100 + ((100*20)/100) = 120 OR (100-2%) + ((98*20)/100)  = 117.6 OR this expense ratio of  will get deducted from value of 120 OR the returns 20% which are shown are after expense ratio deduction?

Sorry for so many questions in one go. Let me know if any question is confusing. Eagerly waiting for your answers

4 replies on this article “Some questions in selecting mutual funds and expense ratio query”

  1. ashalanshu says:
    March 13, 2014 at 10:35 am

    Dear Nikhs, how about google a bit for answering Question 1? I do not believe in star fund managers hence stick to a fund where the process is more important than the fund manager. What net assets has to do with your investments? If you think a fund ‘ll perform for you, how it matter that asset is just 100 Crore or 10000 Crore Rs? I do not take ratings for my own investments. HDFC Top 200 is not good on ratings but I’m investing my personal money in it.

    Thanks

    Ashal

    Reply
  2. nikhs12345 says:
    March 12, 2014 at 11:22 am

    Viren and Ashal Thank you for your reply. Can you please answer other question in the post? posting question again.

    1. But apart from above I saw some other terms in valueresearchonline.com like Mean, sortino, beta. What is the importance of these terms? What value of these terms i should look for?
    2. Also what should we look for regarding duration Mutual fund duration or its fund manager’s duration?
    3. How much net assets are important?
    4. Also if my understanding is correct the ranking on valueresearch is depending on recent returns. may be in last 1 year. Is this correct? If yes should we give importance to the ranking if one planning to invest for long term.?

    Thanks in advance.

    Reply
  3. ashalanshu says:
    March 9, 2014 at 8:41 am

    Dear Nikhs, the 20% return to you derived from the NAV is net return. hence expense ratio is already taken care off. So for you it’ll be 120 Rs.

    Thanks

    Ashal

    Reply
  4. Viren Phansalkar says:
    March 7, 2014 at 11:21 pm

    Please have a look at very enriching post from Prof. Pattu on selection of mutual fund categories:
    http://freefincal.com/select-mutual-fund-categories-suit-goal/

    Why categories? You can read the post and get the answer…

    Thanks
    Viren Phansalkar

    Reply

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