Our Methodology
1 Finance employs a systematic and algorithm-based approach to research and score mutual fund schemes. Our research process consists of multiple steps, which we will describe below:
Key Ratio Analysis
To assess equity mutual fund schemes, we start by analysing key ratios based on the past 10 years of data or available data.
- Sharpe Ratio
Measures investment return relative to its volatility, indicating how much excess return an investor receives for taking on additional risk.
- Sortino Ratio
Similar to Sharpe Ratio, but focuses solely on downside risk, providing a better assessment of an investment's performance in unfavourable conditions.
- Treynor Ratio
Evaluates investment return adjusted for systematic (market-related) risk, helping investors compare investments based on their sensitivity to market movements.
- Jensen's Alpha
Compares an investment's actual return to the expected return based on its market risk.
When these ratios consistently show better performance over an extended period, they receive higher scores
Fund Manager Analysis
We conduct a fund manager analysis to evaluate their past performance, considering their management of prior funds. This assessment includes:
The amount of alpha generated by the fund manager in the same fund category they currently oversee.
The fund manager's cumulative experience in managing funds within the same category.
The fund manager's overall experience, spanning different market conditions and fund categories.
Final Score Calculation
The final scores are derived from the amalgamation of the Fund Score and Fund Manager Score. Mutual fund schemes are scored on a scale of 0 to 100, with 100 being the highest score and 0 being the lowest.
Ranking
Rankings are determined by assessing the final scores of the funds, thereby showcasing their relative standings within their respective categories.
Index Funds Research Methodology
In our research on index funds, we are currently evaluating large-cap index funds. Our analysis includes the following criteria:
- Tracking Error
Measures how closely the fund mirrors its benchmark. A higher tracking error signifies a greater deviation.
- Expense Ratio
The expense ratio represents the fees charged by the fund house for managing the fund.
- Age of the Fund
We assess the fund's operational history; longer track records are usually viewed more positively.
Note - The 1 Finance scoring and ranking model is updated quarterly. We analyse all equity category funds with a track record of more than 1 year, along with all large-cap-based index funds.
This comprehensive and systematic approach ensures that our evaluations are based on up-to-date data, aiding investors in making well-informed decisions.