Index Fund Corner
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| Scheme Name | 1-Year Return | Invest Now | Fund Category | Expense Ratio |
|---|---|---|---|---|
| Axis Nifty 50 Index Fund | +32.80% | Invest Now | Equity: Large Cap | 0.12% |
| Axis Nifty 100 Index Fund | +38.59% | Invest Now | Equity: Large Cap | 0.21% |
| Axis Nifty Next 50 Index Fund | +71.83% | Invest Now | Equity: Large Cap | 0.25% |
| Axis Nifty 500 Index Fund | — | Invest Now | Equity: Flexi Cap | 0.10% |
| Axis Nifty Midcap 50 Index Fund | +46.03% | Invest Now | Equity: Mid Cap | 0.28% |
Here are the key mutual fund ratios investors should keep in mind while considering the returns of the schemes.
Alpha
A mutual fund’s Alpha ratio indicates how well it has performed in comparison to an index or benchmark. It can be expressed as a percentage or as an absolute value. An alpha of zero indicates a fund’s performance is identical to that of its benchmark.
The fund has beaten its benchmark if its alpha value is more than zero, and it has underperformed if it is less than zero.
Beta
The beta ratio indicates how volatile or sensitive a mutual fund portfolio is to the overall market at any given time. It is always represented as a whole number and can be either positive or negative.
A fund that has a Beta of 1 is just as volatile as the market. A Beta value greater than one indicates the fund is more volatile than the market, while a value less than one indicates that the fund is less volatile than the market.
When a fund’s beta is negative, it indicates that its value swings against the direction of the market.
The formula for a Beta ratio is:
Beta = (Covariance of the fund’s returns with the market returns)/ Variance of the market return
Standard Deviation (SD)
The standard deviation ratio in mutual funds, sometimes referred to as the Standard Deviation Ratio (SDR), is a technical analysis metric that calculates the ratio of short-term to long-term standard fluctuations. A fund with a high standard deviation is said to be extremely volatile, whereas one with a low SD is said to be somewhat steady.
Sharpe Ratio
One can determine a fund’s risk-adjusted returns with the help of the Sharpe ratio. The Sharpe ratio, compared to the Treynor ratio, employs the mutual fund’s standard deviation as the denominator. A higher Sharpe ratio is always better, particularly for mutual funds that are extremely volatile.
The formula of the Sharpe Ratio is:
Sharpe ratio = (Fund returns — Risk-free rate) / Fund’s standard deviation
Treynor Ratio
The reward-to-volatility ratio, or the Treynor ratio, measures the amount of extra return a portfolio produces for each unit of risk (or beta) assumed. This ratio indicates your risk-adjusted returns. Therefore, the better the fund’s returns, the higher the Treynor ratio.
The formula of the Treynor Ratio:
Treynor Ratio = (Fund returns — Risk-free rate) / Fund’s beta
Information Ratio
The information ratio tries to determine the consistency of a portfolio manager while also assessing the manager’s capacity to produce excess returns in comparison to a benchmark. Consistency is a desirable quality, and the higher the ratio, the more consistent the manager.
Sortino Ratio
This ratio is a risk-adjusted performance metric for mutual funds and calculates an investment or portfolio’s risk-adjusted return. It is a variation of the Sharpe ratio that accounts for downside deviations. The return per unit of risk assumed by the fund manager increases with a higher Sortino ratio.