Investors always like to analyse different mutual funds on various parameters before making an investment decision. Two key factors they look at are the potential for return promised by the scheme and the risk profile. While investors can look at the past performance of a fund to analyse the first factor, they need a tool to measure the volatility of a fund. A popular metric used for this purpose is called beta.
Extended Internal Rate Of Return (XIRR) and Compound Annual Growth Rate (CAGR) are two important metrics most investors consider while reviewing the performance of their mutual fund investments. Although both metrics are crucial to track performance, they are used in different scenarios. Hence, for any investor, it becomes essential to understand these metrics to track their portfolio performance accurately.
If you are planning to invest in mutual funds, then just knowing about a scheme isn’t enough. Whether you are an experienced investor or a beginner, it is important for you to know the various terms and metrics used to measure fund performance. Among the various terms used, trailing returns and rolling returns assess how well a mutual fund has performed over time.
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Article Summary |
Article Summary
• Gold Exchange Traded Funds (ETFs) and Gold ETF Fund of Funds (FoF) help investors take exposure to gold without facing issues related to purity, security, and storage costs besides erosion of value during the sale of gold jewellery.
It is advisable to maintain a contingency fund for any future emergencies. The quantum of such a contingency fund is relative to different individuals depending on their committed payments, lifestyle expenses, etc.
However, as a generic measure, one should maintain a contingency fund equivalent to cover expenses for the current lifestyle for at least six months to have a sufficient financial cushion. Most people park their emergency funds in savings accounts because of liquidity and nil market-linked risks, however, they may offer interest as low as less than 3%.
Exchange Traded Funds (ETFs) are financial products which provide direct investment exposure to benchmark indices and commodities. As per the SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index. ETFs undertake passive investing, and the fund managers replicate the underlying index and implement changes in the investment portfolio as and when the changes happen in the index constitution.
Exchange Traded Funds (ETFs) are passive investment options that offer direct investment exposure to underlying indices or commodities like silver, gold etc. As per SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index.
Fund managers are mandated to track the specified index and implement changes in the investment portfolio as and when the changes happen in the index constitution. They cannot go beyond the index composition or their respective weights.
Advantages of Exchange Traded Funds
Mutual funds have been steadily emerging as an attractive investment option for retail investors and have become one of the intelligent avenues to invest money. This is because it's convenient to invest in mutual funds, and there are many schemes to choose from.
Across different mutual fund schemes, the investment portfolio may be managed actively or passively. While active investing requires making active investment decisions by the fund managers, passive investing tracks benchmark indices instead of fund managers making independent investment decisions.
In today's world, investors may often feel spoilt for choice amongst the many options available for investing. With a wide variety of mutual funds to choose from, they may struggle to find a suitable scheme for themselves.
