Comparison of Funds

While computing these, it is imperative to use the performance data over the same time periods for two different funds being compared, as returns over different periods vary due to market conditions prevalent then. This means comparing only those funds for which performance data are available during a given period for both of the funds being compared.

Suitability of NAV

NAV change is the most commonly used by investors to evaluate fund performance, and so do the mutual fund managers commonly publish also most. The advantage of this measure is that it is easily understood and applies to virtually and type of fund. This is suitable for evaluating growth funds with withdrawal plans.

The Advisor’s Perspective

If you were an intermediary recommending a mutual fund to a potential investor, he would expect you to give him proper advice on which funds have a good performance track record. If you want to bean effective investment advisor, then you too have to know-how to measure and evaluate the performance of the different fund that are available to the investor. The need to compare different funds performance requires the advisor to the investor. The need to compare different funds performance requires the advisor to have knowledge of the correct and appropriate measures of evaluating the fund performance.

Purpose of NAV

If an investor wants to compare the Return of Investment between two dates, he can simply use the Per Unit Net Asset Value at the beginning and the end periods, and calculate the change in the value of the NAV between the two dates in absolute and percentage terms. Good Luck.

Inverster Perspective - contd..

He therefore needs to understand the basis of appropriate performance measurement for the fund, and acquire the basic knowledge of the different measures of evaluating the performance of a fund. Only then would he be in the position to judge correctly whether his fund is performing well or not, and make the right decision.

The Investor Perspective

The investor would naturally be interested in tracking the value of his investment, whether he invests directly in the market or indirectly through mutual funds. He would have to make intelligent decisions on whether he gets an acceptable return on his investments in the funs selected by him, or if he needs to switch to another fund.

My Policy

I accept compensation for some of my posts. I write honest and genuine reviews based on my findings.