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Difference between revisions of "Mutual Fund performance measurement with Beta"
Cooleo (talk | contribs) (Created page with "{{Alphabets}} *Beta* Beta is a popular measure. We already heard of *high-beta shares* in equity investments. Beta is a measure of an investment’s volatility vis-à-vis t...") |
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{{Alphabets}} | {{Alphabets}} | ||
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− | Beta is a popular measure. | + | '''Beta''' is a popular measure in securities market. |
− | We already heard of | + | We already heard of '''high-beta shares''' in equity investments. |
− | Beta is a measure of an investment’s volatility vis-à-vis the market (or benchmark). | + | '''Beta''' is a measure of an investment’s volatility vis-à-vis the market (or benchmark). |
If Beta is less than 1 means that the security will be less volatile than the market. | If Beta is less than 1 means that the security will be less volatile than the market. | ||
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A beta of greater than 1 implies that the security’s price will be more volatile than the market. | A beta of greater than 1 implies that the security’s price will be more volatile than the market. | ||
− | Beta of DSPBR Eq Fund is 1.16 | + | Let us assume that the Beta of DSPBR Eq Fund is 1.16 |
− | + | This means that, within a given period, for every 1 point move of the benchmark (Nifty 500), the [[Net Asset Value|scheme value (NAV)]] moves to 1.16 | |
It can happen on both upside and downside. | It can happen on both upside and downside. | ||
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Got it ? | Got it ? | ||
− | + | {{GAS}} | |
+ | |||
+ | Is VIX Index something similar? | ||
+ | |||
Yes. VIX itself is an index that measures volatility of the Nifty | Yes. VIX itself is an index that measures volatility of the Nifty | ||
− | |||
− | |||
− | |||
− | + | We get beta values of shares from websites such as TopStockResearch | |
+ | |||
+ | Stocks like JPAsscociates, HFCL etc. for example are considered to be High beta stocks because their Beta Value is more than 1. | ||
+ | |||
+ | That means they move up and or down faster than the index to which they belong to fast moving shares | ||
− | + | Simiarly, Mutual Fund schemes also have a Beta value. | |
− | + | ==What beta is preferable?== | |
− | + | High beta = more unpredictability | |
− | |||
− | |||
Low beta = more predictability | Low beta = more predictability | ||
− | So it depends on the risk | + | |
− | + | So it depends on the risk the investor is willing to take. | |
− | + | ||
+ | If an investor is a high risk taker, he would probably prefer high beta scheme. | ||
+ | |||
For instance, for DSP BR Equity Beta is 1.13 | For instance, for DSP BR Equity Beta is 1.13 | ||
+ | |||
For DSP BR Microcap Beta is 0.99 | For DSP BR Microcap Beta is 0.99 | ||
+ | |||
So DSP BR Microcap, for the sake of this measure alone, is less volatile and more predictable compared to Equity Fund | So DSP BR Microcap, for the sake of this measure alone, is less volatile and more predictable compared to Equity Fund | ||
− | |||
− | + | Of course, this single measure cannot be a sufficient for decision making | |
+ | |||
+ | ==Getting Mutual Fund Beta Values== | ||
+ | Each plan of a Mutual Fund Scheme will have its own beta value. | ||
+ | |||
+ | The official source for this information is the [[Understanding Mutual Fund Factsheet|Mutual Fund Fact Sheet]]. | ||
− | + | Websites such as ValueResearchOnline and MorningStar.in provide easy comparision interface. | |
− | To determine if an MF is performing better or not, compare with similar funds from the same category over 1-year, 3-year and 5-year periods | + | To determine if an MF is performing better or not, compare with similar funds from the same category over 1-year, 3-year and 5-year periods. |
==Related Topics== | ==Related Topics== | ||
*[[Understanding Mutual Fund Factsheet]] | *[[Understanding Mutual Fund Factsheet]] | ||
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*[[Mutual Fund performance measurement with Standard Deviation]] | *[[Mutual Fund performance measurement with Standard Deviation]] | ||
*[[Mutual Fund performance measurement with Sharpe Ratio]] | *[[Mutual Fund performance measurement with Sharpe Ratio]] | ||
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*[[Mutual Fund performance measurement with XIRR]] | *[[Mutual Fund performance measurement with XIRR]] | ||
[[Category:Mutual Funds]] | [[Category:Mutual Funds]] | ||
+ | {{Alphabets}} |
Latest revision as of 20:36, 3 April 2018
Home | Personal Finance | Mutual Funds | Equity |
Beta is a popular measure in securities market.
We already heard of high-beta shares in equity investments.
Beta is a measure of an investment’s volatility vis-à-vis the market (or benchmark).
If Beta is less than 1 means that the security will be less volatile than the market.
A beta of greater than 1 implies that the security’s price will be more volatile than the market.
Let us assume that the Beta of DSPBR Eq Fund is 1.16
This means that, within a given period, for every 1 point move of the benchmark (Nifty 500), the scheme value (NAV) moves to 1.16
It can happen on both upside and downside.
So we can say, it is more volatile than the benchmark index.
Got it ?
Is VIX Index something similar?
Yes. VIX itself is an index that measures volatility of the Nifty
We get beta values of shares from websites such as TopStockResearch
Stocks like JPAsscociates, HFCL etc. for example are considered to be High beta stocks because their Beta Value is more than 1.
That means they move up and or down faster than the index to which they belong to fast moving shares
Simiarly, Mutual Fund schemes also have a Beta value.
What beta is preferable?
High beta = more unpredictability
Low beta = more predictability
So it depends on the risk the investor is willing to take.
If an investor is a high risk taker, he would probably prefer high beta scheme.
For instance, for DSP BR Equity Beta is 1.13
For DSP BR Microcap Beta is 0.99
So DSP BR Microcap, for the sake of this measure alone, is less volatile and more predictable compared to Equity Fund
Of course, this single measure cannot be a sufficient for decision making
Getting Mutual Fund Beta Values
Each plan of a Mutual Fund Scheme will have its own beta value.
The official source for this information is the Mutual Fund Fact Sheet.
Websites such as ValueResearchOnline and MorningStar.in provide easy comparision interface.
To determine if an MF is performing better or not, compare with similar funds from the same category over 1-year, 3-year and 5-year periods.
Related Topics
- Understanding Mutual Fund Factsheet
- Evaluating of Mutual Fund Schemes
- Comparing Mutual Fund Schemes
- Mutual Fund performance measurement with CAGR
- Mutual Fund performance measurement with Standard Deviation
- Mutual Fund performance measurement with Sharpe Ratio
- Mutual Fund performance measurement with XIRR
Home | Personal Finance | Mutual Funds | Equity |