Start at the bottom, not the top
The first thing on a factsheet is usually the return figures. Those tell you what has already happened. Start instead with what the fund actually holds, because that tells you what is likely to happen next.
The parts worth your attention
- Investment objective and category. Confirms what the scheme is required to do. A fund that must hold 80% in large caps will behave like large caps whatever the manager thinks.
- Portfolio holdings and concentration. How much sits in the top ten positions. A concentrated portfolio will diverge from the index in both directions.
- Expense ratio. Deducted from NAV daily. Regular plans include distributor commission within this figure.
- Assets under management. Very small can mean instability; very large can constrain a small cap strategy.
- Fund manager and tenure. A ten-year record under a manager who left last year tells you little.
- The riskometer. The scheme's own statement of where it sits on the risk spectrum.
Reading the return figures properly
Trailing returns — one, three, five years — depend heavily on the end date, and flatter any fund whose recent months were good. Rolling returns, where the fund house publishes them, are far more honest because they average across every possible start date.
Always compare against the scheme's own benchmark and its category, not against a fund in a different category. A small cap fund beating a large cap index is not information.
What a factsheet cannot tell you
Whether the fund suits you. That depends on your horizon, your other holdings, your tax position and how much decline you can sit through — none of which appears on any factsheet.
The document tells you what the fund is. Whether it belongs in your portfolio is a separate question, and the more important one.