{"id":16792,"date":"2026-03-13T04:28:17","date_gmt":"2026-03-13T10:58:17","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=16792"},"modified":"2026-08-18T22:45:20","modified_gmt":"2026-08-19T05:15:20","slug":"mutual-fund-ratio","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/","title":{"rendered":"Before You Chase High Returns, Check These 5 Mutual Fund Ratios"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_87 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\"><p class=\"ez-toc-title\" style=\"cursor:inherit\"><\/p>\n<\/div><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Are_Mutual_Fund_Ratios\" >What Are Mutual Fund Ratios?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#Main_Types_of_Mutual_Fund_Ratios_Investors_Should_Track\" >Main Types of Mutual Fund Ratios Investors Should Track<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Is_Beta_in_Mutual_Funds\" >What Is Beta in Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_is_Standard_Deviation_in_Mutual_Funds\" >What is Standard Deviation in Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Is_Alpha_in_Mutual_Funds\" >What Is Alpha in Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Is_the_Sharpe_Ratio_in_Mutual_Funds\" >What Is the Sharpe Ratio in Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Is_Expense_Ratio_in_Mutual_Funds\" >What Is Expense Ratio in Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#What_Is_Assets_Under_Management_AUM\" >What Is Assets Under Management (AUM)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#Why_Mutual_Fund_Risk_Metrics_Matter\" >Why Mutual Fund Risk Metrics Matter<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#Final_Thoughts\" >Final Thoughts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/#Mutual_Fund_Ratios_%E2%80%93_FAQs\" >Mutual Fund Ratios &#8211; FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/shoonya.com\/blog\/\">Home<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/investing\/\">Investing<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/investing\/mutual-funds\/\">Mutual Funds<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\"><strong>Before You Chase High Returns, Check These 5 Mutual Fund Ratios<\/strong><\/span><\/span><\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many investors compare mutual funds mainly based on returns. However, returns alone do not always reveal the full performance of a fund. Two funds can deliver similar returns but take very different levels of risk to achieve them.<br><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is why investors should understand <strong>mutual fund ratios<\/strong> and other <strong>mutual fund risk metrics<\/strong>.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_Mutual_Fund_Ratios\"><\/span>What Are Mutual Fund Ratios?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual fund ratios are key metrics that help investors understand a fund\u2019s <strong>risk, performance, and cost efficiency<\/strong>. They provide deeper insights than past returns alone.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Main_Types_of_Mutual_Fund_Ratios_Investors_Should_Track\"><\/span>Main Types of Mutual Fund Ratios Investors Should Track<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here are the important ratios in a mutual fund that investors should review:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Risk ratios such as beta and standard deviation<br>\u2022 Performance ratios such as alpha<br>\u2022 Risk adjusted return metrics such as Sharpe ratio<br>\u2022 Cost metrics such as expense ratio<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Common ratios in mutual funds include:<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Mutual Fund Ratio<\/strong><\/td><td><strong>What It Measures<\/strong><\/td><\/tr><tr><td>Beta<\/td><td>Sensitivity to market movements<\/td><\/tr><tr><td>Standard deviation<\/td><td>Volatility of returns<\/td><\/tr><tr><td>Alpha<\/td><td>Excess return compared to benchmark<\/td><\/tr><tr><td>Sharpe ratio<\/td><td>Risk adjusted return<\/td><\/tr><tr><td>Expense ratio<\/td><td>Annual cost of managing the fund<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">These metrics are widely used as <strong>mutual fund risk metrics<\/strong> to evaluate different investment options.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Check the <a href=\"https:\/\/shoonya.com\/blog\/asset-management-companies-in-india\/\" type=\"link\" id=\"https:\/\/shoonya.com\/blog\/asset-management-companies-in-india\/\" target=\"_blank\" rel=\"noreferrer noopener\">top 10 AMC companies in India<\/a><\/em>!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Beta_in_Mutual_Funds\"><\/span>What Is Beta in Mutual Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Beta measures how sensitive a mutual fund is to movements in the overall market.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 <strong>Beta equal to 1<\/strong> \u2013 fund moves in line with the market<br>\u2022 <strong>Beta greater than 1<\/strong> \u2013 fund is more volatile than the market<br>\u2022 <strong>Beta less than 1<\/strong> \u2013 fund is less volatile than the market<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if the benchmark index rises 10 percent, a fund with beta 1 may also rise around 10 percent, while a fund with beta 1.2 may rise roughly 12 percent.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Beta helps investors understand whether a fund is likely to be <strong>more or less volatile than the market<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Want to analyse mutual funds like a pro? <em>Check out what <a href=\"https:\/\/shoonya.com\/blog\/alpha-and-beta-in-mutual-funds\/\" type=\"link\" id=\"https:\/\/shoonya.com\/blog\/alpha-and-beta-in-mutual-funds\/\" target=\"_blank\" rel=\"noreferrer noopener\">Alpha and Beta <\/a>indicate about fund performance.<\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Standard_Deviation_in_Mutual_Funds\"><\/span>What is Standard Deviation in Mutual Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Standard deviation measures the <strong>volatility of mutual fund returns<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Higher standard deviation indicates larger fluctuations in returns.<br>\u2022 Lower standard deviation indicates more stable returns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Two funds may deliver the same average return but have different levels of volatility. Investors who prefer stable performance often choose funds with lower standard deviation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Alpha_in_Mutual_Funds\"><\/span>What Is Alpha in Mutual Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Alpha measures the excess return generated by a fund compared with its benchmark index.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 <strong>Positive alpha<\/strong> means the fund has outperformed the benchmark.<br>\u2022 <strong>Negative alpha<\/strong> means the fund has underperformed the benchmark.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if a benchmark generates 11 percent returns and the fund delivers 14 percent, the fund has produced an <strong>alpha of 3 percent<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Alpha is an important indicator of a <strong>fund manager\u2019s ability to generate superior returns<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_the_Sharpe_Ratio_in_Mutual_Funds\"><\/span>What Is the Sharpe Ratio in Mutual Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The <strong>Sharpe ratio in mutual funds<\/strong> measures risk adjusted returns. It evaluates whether the returns generated by a fund justify the level of risk taken.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Sharpe ratio formula:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">(Return of the fund \u2013 Risk-free rate) \u00f7 Standard deviation<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A <strong>higher Sharpe ratio<\/strong> indicates better performance relative to the risk taken.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, a fund delivering 14 percent returns with lower volatility may have a higher Sharpe ratio than another fund generating 15 percent returns with higher volatility.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Expense_Ratio_in_Mutual_Funds\"><\/span>What Is Expense Ratio in Mutual Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The <strong>expense ratio in mutual fund investments<\/strong> represents the annual fee charged by the fund to manage investors\u2019 money.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This cost includes:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 fund management fees<br>\u2022 administrative expenses<br>\u2022 distribution costs<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even small differences in expense ratio can significantly impact long term returns due to compounding.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investors sometimes use an <strong>expense ratio calculator<\/strong> to estimate how fund costs may affect investment returns over time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Assets_Under_Management_AUM\"><\/span>What Is Assets Under Management (AUM)?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Assets under management represent the <strong>total value of money managed by a mutual fund scheme<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">AUM reflects the size of the fund and the total capital invested by investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A larger AUM can indicate strong investor confidence, but it does not necessarily guarantee higher returns. Investors should analyse AUM along with other <strong>mutual fund ratios<\/strong> and performance indicators.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Mutual_Fund_Risk_Metrics_Matter\"><\/span>Why Mutual Fund Risk Metrics Matter<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Looking only at returns may lead investors to choose funds that take excessive risks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By analysing <strong>mutual fund risk metrics<\/strong>, investors can evaluate:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 market sensitivity of the fund<br>\u2022 volatility of returns<br>\u2022 fund manager performance<br>\u2022 cost efficiency<br>\u2022 overall risk-adjusted returns<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Understanding these metrics helps investors make better-informed investment decisions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Final_Thoughts\"><\/span>Final Thoughts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual fund investing should not be based solely on past returns. Important ratios such as alpha, beta, standard deviation, Sharpe ratio, and expense ratio provide deeper insights into fund performance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Evaluating these ratios in mutual funds helps investors select funds that align with their risk tolerance and long term financial goals.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mutual_Fund_Ratios_%E2%80%93_FAQs\"><\/span>Mutual Fund Ratios &#8211; FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1773318030969\"><strong class=\"schema-faq-question\"><strong>What are the 5 main mutual fund ratios?<\/strong><\/strong> <p class=\"schema-faq-answer\">5 main mutual fund ratios include the <strong>expense ratio<\/strong> (cost of managing the fund), <strong>alpha<\/strong> (fund manager performance), <strong>beta<\/strong> (market volatility), <strong>Sharpe ratio<\/strong> (risk adjusted returns), and <strong>standard deviation<\/strong> (price fluctuations). These ratios help investors choose mutual funds that match their <strong>risk tolerance and financial goals<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773318031635\"><strong class=\"schema-faq-question\"><strong>What are the 7 financial ratios?<\/strong><\/strong> <p class=\"schema-faq-answer\">Seven commonly used financial ratios include <strong>price to earnings ratio, earnings per share, return on equity, debt to equity ratio, quick ratio, profit margin, and dividend yield<\/strong>. These ratios help investors analyse a company\u2019s <strong>profitability, valuation, and financial stability<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773318032274\"><strong class=\"schema-faq-question\"><strong>What are the 12 financial ratios?<\/strong><\/strong> <p class=\"schema-faq-answer\">The twelve common financial ratios include <strong>net profit margin, return on assets, return on equity, asset turnover, inventory turnover, current ratio, quick ratio, debt to equity ratio, interest coverage ratio, earnings per share, price to earnings ratio, and dividend yield<\/strong>. These ratios help evaluate a company\u2019s <strong>profitability, efficiency, liquidity, and solvency<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773318089013\"><strong class=\"schema-faq-question\"><strong>What are the 7 principles of finance?<\/strong><\/strong> <p class=\"schema-faq-answer\">The seven principles of finance include <strong>risk and return relationship, time value of money, diversification, liquidity importance, compounding benefits, inflation impact, and market efficiency<\/strong>.<\/p> <\/div> <\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Source: <\/strong>https:\/\/www.moneycontrol.com<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Disclaimer<\/mark>: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many investors compare mutual funds mainly based on returns. However, returns alone do not always reveal the full performance of a fund. Two funds can deliver similar returns but take very different levels of risk to achieve them. This is why investors should understand mutual fund ratios and other mutual fund risk metrics.&nbsp; What Are &hellip; <a href=\"https:\/\/shoonya.com\/blog\/mutual-fund-ratio\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Before You Chase High Returns, Check These 5 Mutual Fund Ratios&#8221;<\/span><\/a><\/p>\n","protected":false},"author":17,"featured_media":16795,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"categories":[12],"tags":[9520,7171,9519,325,9522,9517,9524,9525,9521,9523,9518],"class_list":["post-16792","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mutual-funds","tag-alpha","tag-assets-under-management","tag-beta","tag-expense-ratio","tag-expense-ratio-calculator","tag-mutual-fund-ratio","tag-mutual-fund-ratios","tag-ratios-in-mutual-funds","tag-sharpe-ratio-formula","tag-sharpe-ratio-in-mutual-fund","tag-standard-deviation"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>5 Mutual Fund Ratios That Smart Investors Track Before Investing<\/title>\n<meta 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