How You Can Use a Mutual Fund Screener to Choose Mutual Funds

September 11, 2024 Mutual Fund

The Indian mutual fund industry is experiencing dynamic shifts influenced by market volatility and evolving investor preferences. According to the Association of Mutual Funds in India (AMFI), the Assets Under Management (AUM) of the mutual fund industry has seen notable growth.

According to AMFI data, the AUM of the Indian mutual fund industry has grown from Rs 10.06 trillion as of July 31, 2014, to Rs 64.97 trillion as of July 31, 2024, a more than 6-fold increase in a span of 10 years. This growth can be attributed to rising investor participation, favourable regulatory changes, and an increasing shift towards systematic investment plans (SIPs).

The mutual fund industry in India is navigating a complex landscape marked by substantial AUM growth and heightened market volatility.

The current market volatility, driven by a mix of domestic and global factors, has created a challenging environment for investors. The Indian equity markets have been oscillating due to fluctuating global economic conditions, domestic policy changes, and market sentiment. Key indices such as the Nifty 50 and S&P BSE Sensex have experienced sharp movements, influenced by factors including inflationary pressures, interest rate changes, and geopolitical uncertainties.

Data as of September 05, 2024
(Source: ACE MF, data collated by PersonalFN Research) 

Both indices continue to reflect broader uncertainties in the global economy, making it difficult for investors to predict market movements with confidence. However, despite the volatility, some sectors have shown resilience, particularly those less sensitive to economic cycles, such as consumer staples and healthcare. This volatility underscores the importance of strategic investment decisions and highlights the need for a well-structured investment approach.

[Read: Sensex, Nifty at All-Time High: What Should Be Your Mutual Fund Investment Strategy in September?]

Market volatility, characterised by sharp price swings and uncertainty, can significantly impact investment returns. Investors must be cautious about their choices, as picking the wrong fund during such times could lead to substantial losses. The right mutual fund selection can help mitigate risks and protect the portfolio from the adverse effects of market fluctuations.

Mutual funds that are well-diversified and managed by experienced fund managers can provide a buffer against volatility. These funds typically spread investments across various sectors, asset classes, and geographies, reducing the impact of a downturn in any single area. Additionally, funds with a strong track record of performance in both bullish and bearish markets can offer a level of stability, ensuring that investors’ portfolios remain resilient during turbulent times.

However, with thousands of mutual funds available in the market, selecting the right one can be overwhelming. This is where a mutual fund screener becomes an invaluable tool. In this article, we will delve into how you can use a mutual fund screener to make informed investment decisions, optimise your portfolio, and achieve your financial goals.

What Is a Mutual Fund Screener?

A mutual fund screener is an online tool designed to help investors filter and compare various mutual funds based on specific criteria. By inputting your preferences and investment goals, the screener narrows down the vast universe of mutual funds to those that meet your requirements. This process can save you time, reduce complexity, and enhance the quality of your investment choices.

Mutual fund screeners are powerful tools designed to help investors efficiently navigate the vast array of mutual funds available in the market. These online platforms allow users to filter and compare mutual funds based on a variety of criteria, making it easier to identify funds that align with specific investment goals and preferences. By inputting personal preferences such as risk tolerance, investment horizon, fund type, and performance metrics, investors can narrow their choices to a more manageable number of options.

The primary function of a mutual fund screener is to streamline the investment selection process. Users can customise their search to include parameters such as historical performance, expense ratios, fund size, and risk levels. This customisation ensures that investors can focus on funds that best meet their individual needs and investment strategies.

[Read: Best Platforms to Invest in Mutual Funds]

Additionally, mutual fund screeners often provide comparative analysis tools, allowing investors to evaluate multiple funds side by side and make informed decisions based on detailed data and performance metrics. By leveraging these tools, investors can enhance their ability to build a well-balanced and diversified portfolio.

Benefits of Using a Mutual Fund Screener

A mutual fund screener offers several benefits that can significantly enhance an investor’s decision-making process.

• Efficient Filtering and Comparison: A mutual fund screener allows investors to filter through thousands of mutual funds based on specific criteria such as performance, risk level, fund type, expense ratio, and more. This efficiency saves time and effort, enabling investors to quickly narrow down their options to funds that meet their investment objectives.
• Customised Searches: Screeners offer the flexibility to customise searches according to an investor’s unique needs. Whether you’re looking for funds with a certain level of historical returns, specific asset allocation, or a particular management style, a screener can tailor the results to your preferences. This helps investors focus on funds that align with their financial goals and risk tolerance.
• Informed Decision-making: By providing detailed information on a wide range of metrics, a mutual fund screener equips investors with the necessary data to make informed decisions. Investors can compare funds on multiple parameters, such as past performance, expense ratios, and portfolio composition, leading to more informed and potentially more successful investment choices.
• Risk Management: A mutual fund screener can help investors assess and manage risk by identifying funds with varying risk profiles. By analysing factors such as volatility, beta, and fund manager performance, investors can select funds that match their risk appetite. This is particularly useful in volatile market conditions, where managing risk becomes even more critical to preserving capital.

A mutual fund screener empowers investors to efficiently identify, compare, and select funds that align with their specific investment strategies, ultimately leading to better decision-making and more tailored investment portfolios.

How to Choose a Mutual Funds with the Help of MF Screener

Here’s a step-by-step guide on how to use an MF screener effectively, followed by an example:

1. Define Your Investment Objectives:

Start by determining your investment goals, such as growth, income, or capital preservation. Consider your risk tolerance, investment horizon, and financial objectives. This will guide you in selecting the right criteria for the screener.

2. Select Screening Criteria:

Use the MF screener to input specific criteria based on your objectives. Common criteria include:

– Fund Type: Equity, debt, hybrid, etc.

– Risk Level: Low, medium, or high risk

– Historical Performance: Choose funds with consistent returns over 3, 5, or 10 years

– Expense Ratio: Lower expense ratios can enhance net returns

– Fund Size: Larger funds might offer more stability, while smaller funds could offer niche opportunities

– Portfolio Composition: Analyse the fund’s holdings to ensure they align with your sector preferences or diversification needs

3. Analyse and Compare Funds:

Once you apply your criteria, the screener will generate a list of funds. Compare these funds on various metrics such as returns, volatility, fund manager performance, and fees. Look for funds that consistently outperform their benchmark and peers.

PersonalFN’s Mutual Fund Screener

4. Review Fund Details:

Dive deeper into the shortlisted funds by reviewing their fact sheets, which provide insights into the fund’s investment strategy, top holdings, sector allocation, and fund manager’s experience. This information helps ensure the fund aligns with your expectations.

[Read: Top 5 Mutual Funds for SIP – Best Performing SIPs in India]

5. Monitor and Reassess:

After selecting a fund, it’s important to monitor its performance periodically and reassess its alignment with your financial goals, especially in changing market conditions.

For instance, you are looking for an equity mutual fund with high growth potential over the long term. Here’s how you might use an MF screener:

• Fund Type: Equity – Multi Cap
• Option: Growth
• Risk Level: High
• 3-Year and 5-Year Returns: Above the category average
• Expense Ratio: Below 1.5%
• Fund Size: Minimum Rs 1,000 crores
• Top Holdings: Prefer funds with diversified holdings in sectors like technology, finance, and consumer goods

The mutual fund screener will list several shortlisted funds. Now, based on the screener’s data and further research, you decide to invest in a particular fund, assured that it aligns with your long-term growth objectives and risk tolerance.

In this example, the MF screener helped you efficiently filter through numerous options and make an informed decision that suits your specific investment needs.

To conclude…

Using a mutual fund screener is a strategic and effective way to navigate the complex landscape of mutual fund investing. This tool not only saves time but also enhances the accuracy of your investment decisions by allowing you to focus on funds that match your risk tolerance, performance expectations, and investment style.

In today’s dynamic financial markets, where information is crucial, a mutual fund screener is an invaluable tool for both individual investors and financial professionals. It simplifies the investment process, reduces the potential for human error, and provides a data-driven approach to selecting funds. As you continue your investment journey, incorporating a mutual fund screener into your decision-making process can enhance your ability to achieve long-term financial success.

The market environment may change rapidly, and what might have been a good investment a few months ago may no longer be suitable. Regularly assessing the performance of chosen funds and making adjustments as necessary ensures that the investment portfolio remains optimised to achieve long-term financial objectives despite market volatility.

This article first appeared on PersonalFN here