Every SEBI-registered mutual fund in India publishes a monthly factsheet — typically 2-4 pages of data on the fund's portfolio, performance, and risk metrics. Most retail investors never open it. Those who do often focus on the wrong numbers — past returns, star ratings, and AUM size. Here are the 6 numbers that actually matter, what they measure, and what a good fund looks like on each metric.
1. Expense Ratio
The annual cost you pay for the fund, expressed as % of NAV. A 1.5% expense ratio means ₹1,500 is deducted annually from every ₹1 lakh invested — regardless of whether the fund makes money. For large-cap funds, anything above 1.0% is expensive (the index fund alternative charges 0.1-0.2%). For small-cap or specialty funds, 1.5-2.0% may be justified if the active manager adds value. Always compare expense ratios within the same category — never across categories.
2. Alpha (Jensen's Alpha)
The excess return delivered above the benchmark (Nifty 50, Nifty Midcap 150, etc.) after adjusting for risk. A 3-year alpha of 4% means the fund returned 4% more annually than the benchmark at the same risk level. Positive alpha is what you pay active management fees for. If alpha is consistently negative over 3-5 years, switch to an index fund in the same category.
3. Sharpe Ratio
Return per unit of risk taken. Higher is better. A Sharpe ratio of 1.0 means you earned 1% of excess return (above risk-free rate) for each 1% of volatility. Compare Sharpe ratios only within the same category — a small-cap fund will always have lower Sharpe than a large-cap fund simply due to higher volatility.
- Expense ratio: <1.0% for large-cap, <1.8% for small/mid cap
- 3-year Alpha: positive and consistent = active manager worth paying
- Sharpe ratio: higher = more efficient risk-adjusted return
- Portfolio concentration: top 10 holdings % (high = conviction fund)
- Portfolio turnover: <50% = long-term holding style
- Fund manager tenure: >5 years at the fund = continuity
🔍 BBS Insight
The single most actionable insight from a factsheet: compare the fund's 5-year alpha against its expense ratio. If the alpha is ₹3 per unit of return and the expense ratio is ₹1.5 — you are getting ₹1.5 of net alpha — worth staying invested. If alpha is ₹0.5 and expense ratio is ₹1.5 — you are net losing ₹1 per unit of return compared to an index fund. That is when you should switch. Run this calculation annually for every fund you hold.