How to Monitor Your Mutual Fund Investment Performance: Key Metrics Every Investor Should Track

How To Track Mutual Fund Performance

THE SMART INVESTOR’S GUIDE TO STAYING AHEAD

Imagine this. You started SIP three years ago. The markets have gone up, down, and sideways, yet you haven’t checked how your mutual fund is really doing. 

You assume all’s well because the NAV looks higher than before.
But here’s a question every investor must ask: “Is my mutual fund actually performing well, or just floating with the tide?”

Monitoring your mutual fund investment performance isn’t about checking numbers every day. It’s about knowing which numbers truly matter. Let’s decode them one by one:

1. GO BEYOND NAV, FOCUS ON TOTAL & ANNUALISED RETURN

The NAV tells you today’s price per unit, not your success story.
To really know how your investment has grown, look at total return (how much value you’ve gained, including dividends and bonuses).

But that’s just the start. You need to annualise it. Find out your CAGR (Compound Annual Growth Rate).

For Example, if your Rs 1 lakh investment has grown to Rs 1.43 lakh in three years, your annualised return (CAGR) is about 12.62%* per year. 
That’s your speedometer; it tells you how your wealth is compounding.

*Assuming Investment in Equity Funds and an average return of 12.62% p.a as per AMFI Best Practice Guidelines Circular No. 109-A /2024-25, Dated September 10, 2024. “Past performance may or may not be sustained in future and is not a guarantee of any future returns.

2. ALWAYS COMPARE AGAINST THE RIGHT BENCHMARK

If your fund gave 13% and your friend’s gave 15%, should you switch? Not yet. 
You need to ask: Compared to what?

Each mutual fund has a benchmark index. Consider this.

  • Large-cap fund - Nifty 100 TRI 
  • Mid-cap fund - Nifty Midcap 150 TRI

If your large-cap fund returned 13% while Nifty 100 gave 10%, that’s outperformance. If it returned 13% while the index gave 16%, that’s underperformance.
According to AMFI, large-cap equity mutual funds in India delivered an average 5-year return of ~15% (as of Sept 2025)

So, compare your returns against the index.

3. MEASURE THE RIDE, NOT JUST THE DESTINATION

Returns alone can mislead. A fund with wildly fluctuating returns may have higher highs but also deeper drawdowns. That’s why risk metrics are essential.

4. DON’T IGNORE THE DOWNSIDE - CHECK DRAWDOWNS

We all love charts that go up. But a true test of a fund’s strength is how it falls. A drawdown is how much your fund dropped from its peak before recovering.

  • Drawdown: The percentage drop from the highest point to the lowest thereafter before a new high is reached.
  • Maximum Drawdown: Worst-case drawdown historically.

If two funds both yield a 12%* CAGR over 5 years, but one has a maximum drawdown of -35% while the other only has a -20%, indicating greater stability. 

*Assuming Investment in Equity Funds and an average return of 12.62% p.a as per AMFI Best Practice Guidelines Circular No. 109-A /2024-25, Dated September 10, 2024. Past performance may or may not be sustained in future and is not a guarantee of any future returns.

5. LOOK FOR CONSISTENCY: ROLLING RETURNS TELL THE TRUTH

A single-year return can lie. What you need are rolling returns, which are averages across multiple overlapping periods (such as every 3-year window in the last 10 years).

Consistent rolling returns show a fund’s ability to perform in different market cycles. A fund that delivers 20% one year and -15% the next is less desirable than one delivering 10-12% steadily. Look at:

  • Rolling returns (e.g., 3-year rolling returns over 10 years): show how performance held up across overlapping windows.

6. UNDERSTANDING THE PORTFOLIO-WHAT’S INSIDE MATTERS

You can’t fully trust returns without understanding what’s inside. Look into your fund’s portfolio composition:

  • How much equity vs debt?
  • Which sectors dominate (IT, banking, pharma)?
  • Are the top 10 stocks more than 60% of the total? (that’s concentration risk)

Debt investors check credit ratings. Don’t ignore quality for a slightly higher yield.

7. KEEP AN EYE ON AUM & FUND HOUSE STABILITY

A rising AUM usually shows trust and steady inflows. A rising AUM signals investor confidence.

  • If AUM is ballooning rapidly, future returns might get diluted (especially in niche or small-cap strategies).
  • Conversely, falling AUM may signal investor redemptions (loss of confidence).

FINAL THOUGHTS

Monitoring mutual fund investment performance is an active process. It’s not about obsessing over daily NAVs, but doing a systematic periodic review using the metrics above. Set a fixed review cycle, at a defined frequency with your financial products distributor, and focus on key metrics like return consistency and risk matrix. Keep your comparisons fair, judge your fund against its benchmark and category, not market noise or headlines. If a fund persistently lags, rethink your allocation, but always ask why before you switch.

Your MF portfolio deserves attention, not obsession.

Because disciplined monitoring doesn’t just protect your money, it strengthens your financial confidence, one review at a time.

"Mutual Fund investments are subject to market risk. Read all scheme-related documents carefully."