Why You Should Study the Portfolio Of A Mutual Fund Scheme Before Investing?

By Sunil Fernandes
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    It's very important to study the portfolio of a scheme before investing in it. In the last three months mutual fund schemes have begun giving negative returns and this is not a good sign.

    Why You Should Study the Portfolio Of A Mutual Fund Scheme Before Investing?
    In fact, the month of April saw the Sensex and the Nifty falling sharply which had a bad effect on the net asset values of a fund.

    Now, there are many websites that offer you the portfolio of a scheme. For example, if you click here you can will see the portfolio of ICICI Prudential Focused Blue Chip Fund.Value Research Online is a great source for checking these things.

    Now, if you click the same you would realise that the fund has a heavy exposure to stocks of ICICI Bank, HDFC Bank, Axis and State Bank of India. Now, you should be able to seek advise on where the banking sector is headed if you want to see returns from the scheme, since bulk of the assets are invested in the scheme.

    In the last few months or so, ICICI Bank and HDFC Bank have lost heavy ground, which is why there may have been some impact on the net asset value of the fund.

    In fact, the fund has given negative returns in the last few months. If the banking sector stocks fall, the net asset value of the fund would continue to deteriorate. It is therefore, a good idea to always study the exposure of the mutual fund scheme and seek professional advise before investing, in case you do not understand industry and equities.

    If the concentration or exposure is heavily in one particular stock or sector, you might see immense volatility in the fund.

    It is therefore advised to study the portfolio of a scheme before investing.

    GoodReturns.in

    Read more about: mutual funds
    Story first published: Monday, May 4, 2015, 11:30 [IST]
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