What Makes a Good Mutual Fund? Metrics You Must Check

By Admin

• 29 Jul, 2025

 What Makes a Good Mutual Fund? Metrics You Must Check

By ProShield Invest | Helping India Invest Smarter in 2025

Investing in mutual funds is no longer a complex task — but choosing the right mutual fund? That’s where most people go wrong. With hundreds of options in the Indian market, knowing what truly makes a good mutual fund is key to building long-term wealth.

In this blog, we break down the most important metrics to evaluate before you invest — so you can make confident, profitable decisions.

🔍 Why Mutual Funds Are a Popular Choice

Mutual funds are ideal for salaried professionals, new investors, and even HNIs because they:

• Offer diversification with small amounts (as low as ₹100)

• Are professionally managed by experts

• Help build wealth systematically (especially through SIPs)

But not all mutual funds are created equal. Let’s understand what sets the best apart.

📊 Key Metrics to Evaluate a Mutual Fund

1. Fund Performance (Returns Over Time)

Look at the fund’s 3-year, 5-year, and 10-year returns. Compare it against its benchmark index. A good fund consistently beats its benchmark.

🔎 Example: A large-cap fund should beat the Nifty 100 index consistently over a period of time.

2. Expense Ratio

This is the annual fee charged by the fund house, expressed as a percentage of your investment.

✔️ Lower is better. For example, index funds typically have an expense ratio under 0.5%, while active funds can go up to 2.25%.

3. Fund Manager Track Record

Your money is only as good as the person managing it. Check the fund manager’s:

• Past experience

• Success rate with similar funds

• How long they’ve been managing the fund

A consistent, experienced fund manager adds trust and stability.

4. Assets Under Management (AUM)

AUM tells you how much money is being managed in the fund. It reflects investor trust.

• Too low = less trust or new fund

• Too high = may become difficult to manage efficiently

💡 For most categories, ₹500–₹5,000 crore AUM is a sweet spot.

5. Portfolio Composition

Check where your money is going:

• Equity Funds: Which sectors, companies, or market caps?

• Debt Funds: Are they holding high-credit-quality bonds?

You want a fund that’s diversified — not overly exposed to one risky bet.

6. Standard Deviation & Beta (Risk Indicators)

• Standard Deviation shows how much the fund's return deviates from its average.

• Beta compares the fund’s volatility to the market.

A lower Beta and standard deviation usually indicate less risk — especially important for conservative investors.

7. Sharpe Ratio (Risk-Adjusted Return)

This shows how much return the fund is generating for the amount of risk taken.

✔️ Higher Sharpe Ratio = Better.

8. Exit Load and Lock-in Period

Always read the fine print. Some funds charge an exit load if you redeem within a specific time, while ELSS funds have a 3-year lock-in.

Make sure the investment timeline matches your financial goals.

🧠 ProShield Invest Tip:

Don’t chase just returns. Evaluate risk, consistency, and cost too. Diversify your mutual fund portfolio across categories — large-cap, mid-cap, debt, hybrid — based on your goals and risk profile.

💼 Invest Smarter with ProShield Invest

At ProShield Invest, we help salaried professionals and new investors make data-driven, goal-based investment decisions. Whether you're investing ₹500 or ₹50,000/month, our experts guide you every step of the way.

📞 Start Investing Today

🔹 Website: www.proshieldinvest.in
🔹 Email: contacts@proshieldinvest.in
🔹 Phone: 011-69290568