Factors that affect the performance of Mutual Funds (2024)

Everyone today is aware that Mutual Funds are a popular and safe choice for investing your money. A range of financial ratios measure the performance of Mutual Funds, so that you can decide which one is a good option for your financial goals.

However, if you want to delve deeper and find out what makes a Mutual Fund successful, you can just read on. Listed below are the six main factors that determine the performance of any Mutual Fund:

1. Fund Manager/ Fund managing teamAn organization (or a mutual fund) is as good as the people who manage it. An experienced and efficient fund manager would be able to select the right securities and time for investing; the success of the fund greatly depends on both.

See Also

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1. Performance of the securities in the portfolioA mutual fund can invest in various asset types like stocks and equities. The performance or results of the fund is therefore directly dependent on the performance of these assets. In simpler terms, these securities are the building blocks of the Fund.
2. Expense RatioThe fund managers charge a fee to manage your money, this is known as expense ratio. Of-course a high expense ratio will cut into your profits. For this reason, SEBI has restricted the expense ratio to 2.25%.
3. Economic ChangeThe state of the country’s economy and the government policies also impact the results of the fund. All investments in a booming economy are likely to flourish. Also, if the fund has invested in sectors that the government is promoting then the results are bound to be positive.

1. Cash FlowA larger fund can diversify its portfolio and invest in a range of activities. This leads to a greater chance of profitability. In turn, a successful fund attracts more cash flow generating more choices for the fund manager to invest in.
2. Assets Under Management (AUM)The total market value of all the investments managed by the Fund is also known as Assets Under Management. This is also method to gauge the performance of the fund. Higher the AUM better likelihood that the Fund makes a profit.

When you invest with Fikaa, you really need not worry about any of the above factors. Fikaa’s AI is already programmed to consider a whole lot more before selecting the right Mutual Fund as per your requirements. So, what are you waiting for?

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