Goal: How to choose the winning mutual funds with expense ratios, Sharpe ratio and the other key numbers.

Key Metrics to Analyze
1. Expense Ratio 💸
– What? Annuals made by the fund from fund (as % capitals).
– So what: Less fees = More gains for you.
– Example:
– Fund A: Expense ratio = 0.5% → on On ₹1 lakh, expenses = ₹500/year.
– Fund B: Expense ratio = 2% → On ₹1 lakh, expenses = ₹2,000/year.
– Winner: Fund A (saves ₹1,500/year).

Indian Benchmark:
– Index funds (e.g. UTI Nifty 50 Index Fund) are even achieve in ratios of 0.2% or less.
– Actively managed fund (e.g. Axis Blue-chip Fund) has 1-1.5%**.

2. Sharpe Ratio 📊
– What?
Measures risk-adjusted returns. Higher = Greater returns per unit of variation.
– Example:
– Fund X: Sharpe ratio = 1.2 (fine).
– Fund Y: Sharpe ratio = 0.5 (negative).
– Pro Tip: Compare Sharpe ratios within the same category (e.g., large-cap vs. large-cap).

 Example:
– Parag Parikh Flexi Cap Fund has Sharpe ratio just ~1.3 (5y) indicating Good Risk return performance.

3. Past Performance 📅
– What?
Historical returns over 3, 5, and 10 years.
– Catch: Chances good past performance NOT indicative of future results, but consistency COUNTS.
– Example:
– Nippon India Small Cap Fund gave 24% CAGR in 5 yrs (high volatility).
– HDFC Balanced Advantage Fund. fetch all with 12% CAGR with lower risk

Rule: Prefer funds that are a consistent achiever (e.g. Nifty 50 TRI for large cap Funds).

4. Fund Manager & AUM 💼
– Fund Manager Tenure: Longer tenure, better strategy (For e.g. Prashant Jain at HDFC Mutual Fund more than 20+ years)
– AUM (Assets Under Management):
– Too small (<₹500cr): Liquidity risks.
– Too big (>₹20,000cr): Slow on foot.

 Example:
– SBI Small Cap Fund (AUM ~₹25,000cr) got limited in buying small change stocks owing to its size.

Tasks for you 👍
1. Use Screening Tools:
– Fund screener on [Morningstar India](https://www.morningstar.in) or [Value Research](https://www.valueresearchonline.com).
– Sort by: Filter by: Expense ratio : <1% ; Sharpe ratio : >1; 5yr returns: >12%.

2. Analyze a Fund:
– Pick HDFC Mid-Cap Opportunities Fund and check:
– Expense ratio vs. category average.
– Rolling returns (3-year/5-year).

3. Start a SIP:
– Spend ₹500/month in low cost index fund (eg; Nippon India Nifty 50) through Coin by Zerodha or Groww or Motilal.

Key Takeaways
1. Low Fees Win: 1% in expense ratio difference can cost you 10+ lakhs over 20 years.
2. Sharpe > Raw Returns: A 15% portfolio with large volatility might be more riskier than 13% portfolio with consistent and solid returns.
3. Manager Matters: Track record > Short-term hype.

Common Indian Investor Questions
– Is a 2% expense ratio too high?
Yes! Stick to funds under 1.5% (equity) and 1% (debt).
– Should I pick growth or dividend option?
Growth (reinvests dividends) for compounding; dividend for regular income.
– Does AUM size matter?
For small/mid-cap funds, avoid AUM >₹10,000cr to ensure agility.