[Read:<\/strong> Your Mutual Fund Scheme Renamed. What Should You Do?<\/a>]<\/p>\n\n\n\n It is likely that you may have invested a\ngood amount regularly, but the scheme proved to be a non-performer. <\/p>\n\n\n\n You may ignore underperformance due to\nshort-term turbulence or volatility in the market, or possibly because the fund\nmanager took a contrarian bet to the market. It may take some time for the\nfund to overcome the volatility and the fund manager’s strategy to pay off.<\/p>\n\n\n\n However, when a mutual fund scheme\ncontinues to repeatedly and consistently underperform over a longer period,\nthen it is a sign of poor quality of fund management and you need to deal with\nit seriously. The following could be some of the reasons for it:<\/p>\n\n\n\n [Read: <\/strong>Why Do Certain Mutual Fund Schemes Underperform?<\/a>]<\/p>\n\n\n\n Do note that a non-performing mutual fund, by\ndefinition is one that consistently underperforms relative to its benchmark and\npeers over the long period. If you\u2019ve been holding non-performers in your\nportfolio, the returns clocked may not be meaningful enough to accomplish the\nenvisioned financial goals. <\/p>\n\n\n\n To check the consistency of a scheme\u2019s\nperformance, evaluate\u2026<\/p>\n\n\n\n (Image source: freepik.com)<\/p>\n\n\n\n [Read: <\/strong>Why Comparing Returns to Risk Is More Meaningful!<\/a>]<\/p>\n<\/ul>\n\n\n\n While checking the consistency of the\nscheme’s performance, giving adequate weights to each of these parameters is\nessential for meaningful results. <\/p>\n\n\n\n Remember, if the scheme has not delivered\nthe required performance in a sufficient span of time, then it warrants your\nattention –calls for pruning and weeding out the duds\nto replace them with better and well-deserving schemes to ensure you\nare on track to accomplishing your financial goals. The aim of mutual\nfunds, particularly equity-oriented schemes, is to outperform its benchmark and\nprovide you with better returns – generate an alpha. <\/p>\n\n\n\n![\"\"](\"http:\/\/blog.certifiedfinancialguardian.com\/wp-content\/uploads\/2019\/07\/cfg-blog-3-7-2019-2nd.jpg\")
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\nWhile evaluating performance, it is important to not just look at the returns but the risk as well. To put it simply, assess the risk-adjusted returns. \n
Ideally, an equity scheme should not be concentrated to a particular set of stocks and\/or sectors, unless it is the stated investment mandate.
\nLikewise, in the case of debt funds, the manager must take care to have high-quality debt papers while maintaining the maturity profile and managing the credit risk.
\nIn addition, the scheme should also have a low churn ratio as excess churning increases the overall expense of the scheme and impacts the returns. <\/ul>\n\n\n\n
\nPlus, check the profile of the fund manager \u2013\u2013his \/her experiences; the number of schemes he\/she manages; the performance track of schemes they manage; and so on. \n<\/ul>\n\n\n\n
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