If we see a range of products in a supermarket, we can get confused about which one to pick. When investing in mutual funds, the experience of most investors is no different.
With a vast number of schemes to choose from within each category, it is challenging to zero in on one fund.
Even two schemes in the same category may not be similar. They could follow different investment strategies, the portfolios could be dissimilar, and thus their risk-reward equation may be different.
Thus, before you invest in any scheme, it makes sense to compare mutual funds online.
Using an online mutual fund screener tool is worthwhile. The mutual fund screener tool simplifies comparing mutual funds online and is intuitive.
It allows you to compare multiple schemes across key parameters such as returns over various periods, expense ratios, risk ratios (like Sharpe and Standard Deviation), fund category averages, and more.
All you have to do is select the category (equity, debt, hybrid, solution-oriented, and others) and sub-categories like large-cap, mid-cap, small-cap, etc.
Some online mutual fund screeners with advanced features, also make it possible to compare the portfolios of the schemes.
Certain screeners also allow you to provide inputs such as your risk tolerance, financial goal/s, investment horizon, and then reveal the name of schemes with indicative allocation accordingly.
Benefits of Using an Online Mutual Fund Screener
- It helps you choose a suitable mutual fund scheme using filters for returns, risk, time horizon, expense ratio, etc. for each category and sub-category.
- If the screener provides an advanced feature to compare the portfolio of the schemes, it could also help you filter in on schemes with distinctive portfolio features.
- Looking for schemes considering risk ratios may help you zero in on those that match your personal risk tolerance. This can potentially help you earn optimal returns for the level of risk taken.
- When risk tolerance, financial goal/s, and investment horizon, are carefully chosen as filters, it may also help you invest an adequate amount to achieve the envisioned goal.
So, comparing mutual funds online using a screener can help you make an informed decision and avoid picking schemes randomly.
It can be empowering and help you select funds that align well with your needs.
That being said, avoid committing certain mistakes…
Mistakes to Avoid When Comparing Mutual Funds
- Don’t compare mutual fund schemes only on past returns. This can be risky, as it is possible that to generate higher returns, the mutual fund scheme has exposed its investors to higher risk. Also, it is not necessary that higher returns would continue year after year.
- Don’t compare apples with oranges. The comparison should be fair. Meaning, that the comparison should be between schemes from the same category and sub-category. Avoid comparing equity funds with debt funds.
Similarly, when you are looking for the best bluechip funds, the search should be within large cap funds and not large & mid cap funds. These have different investment mandates and their risk-return profiles are different.
- Avoid comparing the net asset value (NAV) of mutual funds. It is a common misconception that schemes with low NAV will have a higher return potential. It is unlike investing in stocks, where demand and supply influence the price.
Looking for schemes whose NAVs are cheap won’t help you create a winning mutual fund portfolio. The NAV simply denotes the current value of all securities the scheme’s portfolio holds.
Usually, funds that have been in existence for longer have a higher NAV due to a longer performance track record. Why would you want to avoid a fund with a great track record?
Likewise, certain schemes with a higher NAV could be lagging in performance. Only if two schemes have invested in the same companies with similar weightage, will they are likely to generate similar returns.
Follow a holistic approach to compare mutual funds online. While screeners can be a decent starting point to short-list schemes, you need to do more…
- While considering historical returns, look for consistency. It’s worthwhile to look at how a scheme has performed in both bull and bear market phases.
- Evaluate the risk the scheme takes. If you want high returns, the fund will mostly have to take high risk. So, watch out for the standard deviation (a measure of risk), and ratios such as sharpe, sortino, and information ratio (which reflect risk-adjusted returns).
- You can assess much of the risk-return attributes by the portfolio characteristics of the scheme. Hence, study the scheme’s asset allocation, top holdings, market-cap allocation, portfolio churning rate etc. If it is a debt mutual fund scheme, assess the rating profile of the debt securities, average maturity, and yield-to-maturity (YTM) among other aspects.
- Compare mutual fund schemes based on the number of years it has been in existence. It should have a reliable long-term track record. The scheme should also be from a fund house with a reliable long-term track record. The fund house should be following robust investment processes and systems.
- Finally, it is important to evaluate if the expense ratio charged by the scheme is justified. Remember, a fund with a high expense ratio isn’t necessarily bad if it consistently outperforms after fees.
Conclusion
In an environment where the stock market is experiencing high volatility in 2025 due to various reasons, wisely comparing mutual funds online is in your best interest.
If you spend some time on research and make informed comparisons, you are more likely to build wealth steadily and sustainably.
Investing in an individualistic exercise; there is no one-size-fits-all approach. Thus, make sure to choose schemes for your portfolio that are in line with your personal risk profile, broader investment objective, financial goal/s, and the time horizon to achieve those goals.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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