Understanding Mutual Fund Factsheets

If the NAV is the heartbeat of a mutual fund, the factsheet is the full medical report. Every month, the AMC publishes this document, and reading it effectively — like a doctor reads an X-ray — is essential for sound fund analysis. SEBI requires factsheets to include NAV, AUM, expense ratio, portfolio holdings, and benchmark comparison as standard disclosures. Under the new SEBI (Mutual Funds) Regulations 2026, monthly disclosure of portfolio overlap is now mandatory, adding another layer of transparency. Here is what to focus on. First, the fund manager commentary — this is where the fund manager explains the market view and portfolio strategy. Reading between the lines is important: if the fund manager says "we have increased our cash allocation", it likely means they are cautious about valuations. If they say "we have rotated from IT to banking", they see value opportunities in financials. Second, the top 10 holdings and their percentage of the portfolio. If the top stock is 8-10% of AUM, the fund is concentrated — higher risk, higher potential. If the top 10 together are only 30%, the fund is well-diversified. Third, sector allocation should be checked for diversification or concentration. Fourth, risk ratios — SD, Sharpe, Beta — should be studied and compared with category averages. Fifth, for equity funds, the portfolio PE and PB ratios are important. A fund with a PE of 35 in a market where the Nifty PE is around 22-24 is overweight on growth/expensive stocks. Sixth, the risk-o-meter shows SEBI's official risk classification from "Low" to "Very High" — this must match the investor's risk profile.