A Factsheet gives an overall idea of your mutual fund scheme as well as the fund house. It tells you the investment objective of the fund, where the fund invests, fees and charges, exit/entry loads, returns generated by the scheme over various time buckets, the Net Asset Value and the ratings of the underlying securities in the fund. Read the factsheet before deciding whether to invest in the fund or not.

The Riskometer, which is part of the mutual fund factsheet, shows the risk level of the particular scheme at a glance. The various categories of risk are low, moderately low, moderate, moderately high and high. The regulator, Sebi, has made it mandatory for all mutual funds to include the riskometer. Debt funds would fall in the low to moderately high-risk categories while equity funds would fall in the moderately high to high-risk categories.

Open-ended funds are funds in which you can invest and exit from any time. They do not have a fixed maturity period. Most equity funds are open-ended funds unless it is specified otherwise.
Close-ended funds are those in which you can invest only during a particular window, post-which the fund is closed for fresh investment. Besides, they can be redeemed only on maturity. If you wish to exit the fund before the maturity period, you will have to sell them on the exchanges.

Every mutual fund scheme has two kinds of plans-growth and dividend. In the growth plan, the returns generated are invested back into the fund and it continues to earn more returns. The investor gets the returns at the time of redemption. In dividend plans, the returns generated are paid out at regular intervals in the form of dividends. Growth plans are meant for wealth creation, while dividend plans help in income generation.

Exit load is the charge you have to pay for exit the fund, in other words redeeming your units before a certain time period. It is mentioned in the fund factsheet. It is calculated as a percentage of the NAV. In the case of equity funds, the exit load is 1% if redeemed before the end of one year. In debt funds the lock-in period is lesser than one year. The aim behind exit load is to ensure that investors don’t redeem their investments too early

Assets Under Management or AUM is the total market value of the corpus managed by the mutual fund. The fund house declares the AUM for its various schemes once in a quarter. Older funds with more number of investors will have large AUMs. The AUM size indicates the strength of the fund house. Though it does not necessarily mean that a fund with a large AUM is better than one with a small AUM.

The expense ratio tells you how much the fund house charges for managing your investment. It includes the commission paid to the distributor as well as other expenses incurred by the fund house. A higher expense ratio means more returns for the investor and vice versa. But that does not mean you should avoid a fund with a higher expense ratio. If it is generating superior returns as compared to its peers, then it is worth investing int.

NAV or Net Asset Value – Net Asset Value is the price of each unit in a mutual fund scheme, similar to the price of an equity share. NAV shows the performance of the mutual fund scheme and is based on the securities or stocks held in the scheme NAV changes daily.

Short term and long term capital gains & tax:
When you sell mutual funds you are liable to pay capital gains tax on the profit you make, that is on the amount earned over the price at which you purchased the mutual funds. In the case of equity funds, the capital gains tax is liable on gains over Rs 1 lakh. So, if your gains are Rs 1.5 lakh in a year, you will be liable to pay tax on Rs 50,000. The short-term capital gains tax, if sold before one year, is 15%. Long-term capital gains tax, if sold after one year, is 10%. In the case of debt funds, the short-term capital gains tax is applicable if you sell within three years. The applicable rate is your income tax slab rate. The long-term capital gains, i.e., if you sell after three years, is 20% after indexation. Indexation can help lower your tax impact as it links the purchase price to the inflation rate.

• CAGR or Compounded Annual Growth Rate shows how much your mutual fund returns have grown over a period of time, on an annualised basis. It is calculated by taking the average returns earned every year and adding it to the previous year’s growth.
• Absolute Returns is the return generated by the fund over a specific period of time, i.e., how much the NAV has increased since investment.
• Rolling Returns measure the returns generated by the mutual fund for a specific period of time, at regular intervals, over different time periods. For instance, you can look at the 1-year return of the fund at regular intervals over a 3-year or 5-year period and take the average of that. This will be called the 1-year rolling return. Similarly, you can get 3-year rolling return or 5-year rolling return.