Peer comparison in mutual fund selection helps you compare one fund with similar funds in the same category. It shows how well the fund is performing in relation to its peers. This helps you choose better-performing funds, understand fees, risks, and consistency, and avoid funds that are underperforming compared to others with the same goals.

What Is Peer Comparison in Mutual Funds?

Peer comparison means checking how one mutual fund performs compared to other funds in the same category or segment. For example, comparing one large-cap equity fund with other large-cap funds. This helps you understand if your chosen fund is doing well or lagging behind others with similar goals and strategies.

Why Is Peer Comparison Important in Fund Selection?

Peer comparison is important because it helps you select better mutual funds by comparing returns, expense ratios, and risk levels. Even if a fund is giving good returns, another fund in the same category might be doing better with lower risk or cost. This comparison gives you a clearer picture before investing.

What Factors Should You Compare Among Peers?

When comparing mutual funds, look at these key factors: past returns over 1, 3, and 5 years, expense ratio, fund manager performance, risk (volatility), and consistency. Also check portfolio quality and how the fund performed in market ups and downs. All this helps in making a balanced decision.

How Does Peer Comparison Help in Avoiding Poor Funds?

When you compare funds with peers, you can easily spot underperformers. If a fund consistently gives lower returns than similar funds and has a higher expense ratio, it may not be a good choice. Peer comparison protects you from choosing weak funds that may not match your financial goals.

How Often Should You Do Peer Comparison?

You should review your mutual fund investments and do peer comparison at least once every 6 months or once a year. This helps you check if your fund is still performing well compared to others. If it's falling behind, you can consider switching to a better-performing option for improved returns.

Can Peer Comparison Improve Your Portfolio?

Yes, peer comparison can improve your portfolio by helping you pick the most efficient and best-performing funds. It ensures your money is invested where it has the highest potential. Over time, this smart selection process can lead to better returns and help you meet your financial goals faster.