Trying to find a good fund? It isn't easy.
To begin with, you can check the returns.
But that may not be good enough. By now, most
investors know that usually higher returns are accompanied
by higher risk. And that you should keep your return
expectation in line with your appetite for risk.
But how do you compare the risk of one fund with another? With over 2000
funds of a wide variety, it can be a complicated exercise. Fund Rating
simplifies your fund selection. It is an innovative measure-
easily understood, objective and effective if used properly which
simplifies your fund selection.
value do Value Research's Fund Ratings offer to investors?
are now more than 2000 mutual funds available to investors in
India which together manage close to Rs 5,00,000 crore. Value Research's
Fund Ratings offer investors a quick and easy way to identify funds
that have produced strong risk-adjusted performance relative to
their peers. Value Research's Fund Ratings are completely objective
should investors use Fund Ratings? Fund Ratings tell how a fund has performed on a risk-adjusted
basis relative to a relevant category in the past. That is a useful
piece of information, but it's not enough for smart investment decision.
Fund Rating is a good starting point for a fund evaluation.
How to use Fund Ratings to construct a portfolio? An optimal portfolio will not necessarily feature only four and
five star funds. An investor needs to consider other factors such
as risk tolerance, how the various funds in the portfolio may work
together and appropriate diversification across asset classes. It
may be that a particular fund, which currently has a two Star Rating,
is the best choice for a portion of an investor's portfolio. An investor
should contact their investment advisor for further assistance with
these types of portfolio decisions.
the Value Research's Fund Ratings based solely on returns? No. The Star Rating is a measure that balances both risk and return.
are the ratings calculated?
Once a month.
Value Research charge fund companies to rate their funds?
No. Value Research does not charge fund companies to rate their funds
or use the ratings.
Does Value Research make its calculation methodology public?
Yes. The methodology can be found on our web site at www.valueresearchonline.com
Are funds rated independently or as part of a group?
Funds are rated based on their performance relative to other funds
in their category.
is the minimum number of funds required to form a category for rating
Ten funds, each with a minimum of three years history for equity
funds and 18 months for bond funds.
are the categories of funds for which Value Research does not provide
By definition, the Specialty equity or debt funds are those funds
that do not fit neatly into one of the other categories. They are
not directly comparable. For example, this category includes a specialty
equity fund e.g. an MNC fund or specialty debt fund e.g. fixed maturity
plans, which do not form a homogeneous group. Therefore, it would not
make sense to compare them to each other and calculate a Star Rating
on that basis. Also fund are not rated if they do not disclose their
NAV regularly. All other categories are eligible for rating.
Value Research consider management fees when rating funds?
Yes, the Star Ratings are calculated on the returns a fund earns after
management fees. There is no other special consideration of fees.
The Value Research Star Ratings do not include the effect of loads.
The reason for this is that loads are variable (and negotiable) so
there is no one "right" answer for what the value should
be. Investors should consider load when choosing a fund.
much history does a fund require to be rated?
Equity funds less than 3 years old and bond funds less than 18 months
old are not rated.
time periods do the Fund Ratings take into consideration?
In case of equity funds, a fund's overall rating stems from a weighted
average of two time periods - three and five where available. Equity
funds less than three years old are not rated. In case of debt funds,
a fund's overall rating stems from a weighted average of two time
periods - 18 months and 3 years where available. Bond funds less than
18 months old is not rated.
just looked at the Value Research's Fund Ratings and realized a fund
I own only receives two stars. Should I sell this fund? Not necessarily. The Star Rating is a decent first screen for
mutual funds, but it is only an introduction to a fund, not a conclusion.
The rating is an evaluation of the past, not a prediction of the future.
did a fund lose a star? Or why did a Star Rating change?
It' s based purely on mathematics. A fund's Star Rating is based solely
on a formula that Value Research recalculates each month - there is
no subjective input. The loss of a star doesn't mean someone at Value
Research has downgraded the fund - it simply means the fund's relative
performance is currently below the cut-off point for its previous rating.
should I do if a fund I invest in does lose a star?
The fact that a fund has earned a lower Star Rating is not necessarily
a signal that it needs to be sold out of your portfolio. It is an
indication that the fund may bear closer monitoring over the near
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