How to Read a Fund Fact Sheet

Every month, the fund house publishes a Fact Sheet. It's a 1-2 page PDF that has everything you need to decide: Invest or Skip?

Let's decode it section by section.

1. Fund Basic Information (The Header)

What You'll See:

• Fund Name: Axis Bluechip Fund - Direct Growth
• Category: Large Cap Equity
• Benchmark: Nifty 100 TRI
• Fund Manager: Shreyash Devalkar (Since Oct 2020)
• AUM (Assets Under Management): ₹38,500 Crores
• Expense Ratio: 0.46%
• Exit Load: 1% if redeemed before 1 year

What to Check:

• Fund Manager Tenure: If less than 2 years, be cautious (Unproven).
• AUM: Too small (less than ₹100 Cr) = High risk. Too large (greater than ₹50,000 Cr) = Inflexible.
• Expense Ratio: Direct should be less than 1.5% for equity.

2. Performance (The Most Misleading Section)

Returns Table:

Period	Fund Return	Benchmark Return	Category Average
1 Month	3.2%	2.8%	2.5%
6 Months	8.5%	7.2%	7.0%
1 Year	18.3%	16.5%	15.8%
3 Years	19.2%	17.8%	16.5%
5 Years	17.8%	16.2%	15.0%

How to Read:

1. Ignore 1-month, 3-month returns (Too volatile, meaningless).
2. Focus on 3Y, 5Y, 10Y returns (Long-term consistency).
3. Compare with Benchmark (Is it beating Nifty 100?).
4. Compare with Category Average (Top quartile or bottom?).

Red Flags:

• Fund underperforming benchmark for 3+ years.
• Sudden surge in 1-year returns (Might have taken high risk).

3. Portfolio Breakdown (Where Your Money Actually Goes)

A. Top 10 Holdings

Stock	Sector	% of Portfolio
Reliance Industries	Energy	8.5%
HDFC Bank	Banking	7.2%
ICICI Bank	Banking	6.8%
Infosys	IT	6.5%
TCS	IT	5.9%
Kotak Mahindra	Banking	4.8%
Bharti Airtel	Telecom	4.2%
Asian Paints	Consumer	3.8%
L&T	Capital Goods	3.5%
Axis Bank	Banking	3.2%

What to Check:

• Concentration: Top 10 should be less than 50-60% (If 80%, too risky).
• Sector Concentration: If Banking greater than 30%, you're exposed to one sector crash.
• Overlap: If you hold multiple funds, check if Top 10 stocks are same (No diversification!).

B. Sector Allocation

Sector	%	Ideal
Banking	28%	20-30%
IT	15%	10-20%
Auto	8%	5-10%
Healthcare	7%	5-10%
FMCG	6%	5-10%
Energy	10%	5-15%
Others	26%	-

Warning: If one sector greater than 40%, you're taking sector-specific risk.

C. Market Cap Allocation

Cap	%	Expected (Large Cap Fund)
Large Cap	82%	greater than 80%
Mid Cap	15%	less than 20%
Small Cap	3%	less than 10%

Check: Does the fund follow its category mandate?

4. Portfolio Turnover Ratio (The Hidden Churn)

Turnover Ratio = How much of the portfolio was changed in 1 year.

Ratio	Meaning
less than 30%	Buy and Hold (Good for long-term)
30-70%	Moderate churn (Acceptable)
greater than 100%	High-frequency trading (Tax inefficient)

Why It Matters:

• High turnover = More transaction costs (Eats into returns).
• High turnover = More capital gains tax (If you redeem).

5. Rolling Returns (The Truth Teller)

Rolling Returns = Return in every 3-year period (Not just last 3 years).

Example:

• 3-Year return ending Jan 2024: 18%
• 3-Year return ending Jan 2023: 22%
• 3-Year return ending Jan 2022: 15%
• ... (100 such data points)

Best Funds: Consistently in top 25% across all rolling periods.

Why Rolling > Point-to-Point:

• Point-to-point: "Lucky" start/end dates.
• Rolling: True consistency.

6. Risk Metrics (The Unsexy But Critical Part)

A. Standard Deviation (Volatility)

• Higher SD = Higher swings (Risky).
• Lower SD = Stable (Less stress).

Example:

• Fund A: SD = 12% (Expect ±12% swings).
• Fund B: SD = 8% (More stable).

B. Sharpe Ratio (Risk-Adjusted Return)

Formula: (Fund Return - Risk-Free Rate) / Standard Deviation

Sharpe Ratio	Meaning
greater than 1	Excellent (High return for risk taken)
0.5 to 1	Good
less than 0.5	Poor (Not worth the risk)

C. Beta (Market Sensitivity)

• Beta = 1: Moves with market.
• Beta greater than 1: Aggressive (Falls harder in crash).
• Beta less than 1: Defensive.

7-Day Action Plan

Day 1: Download the latest Fact Sheet of your current fund (From AMC website).
Day 2: Check Top 10 holdings. Do you recognize the companies? Are they quality?
Day 3: Compare 3Y and 5Y returns with Benchmark and Category Average. Is it in top 25%?
Day 4: Check Sector Allocation. Is one sector dominating (greater than 40%)? Risky!
Day 5: Look at Portfolio Turnover. If greater than 100%, question the fund manager's strategy.
Day 6: Check Standard Deviation. If you can't handle 15% swings, pick a low SD fund.
Day 7: Set a calendar reminder to review Fact Sheet every 6 months. Not every month (Leads to panic).

Quiz

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💡 Final Wisdom: "The Fact Sheet is the fund manager's report card. Don't skip it. Investing without reading it is like marrying someone you've never met."