How do you calculate the holding ratio of a mutual fund? | Motilal Oswal

How do you find out a Mutual Funds holding ratio

It is tempting to begin investing in the stock market as an individual, picking and choosing stocks as per best practices, advice and your own research, and making use of the plethora of cheap discount brokers available on the market. However, you’ll soon realize that in order to select a strong portfolio of stocks, you will have to put in a lot of effort in order to first learn the market and how it functions, the technicalities and terminologies etc, and then spend a considerable amount of time carrying out your market research in order to buy and sell stocks. Some people, despite having the will to invest, do not want to do this. This is where Mutual funds come in.

Mutual Funds

A mutual fund can be simply understood as a basket of stocks that you are buying into at once. A fund manager operates the fund and in exchange for a fee, you get a piece of the pie. However, over time, mutual funds have also evolved to meet varying consumer needs, resulting in a vast variety of types of funds, with different focuses, themes, caps etc. However, the underlying performance will always depend on the underlying stocks, so you may want to make sure you understand what the fund is invested in. You can do that by checking your Mutual Funds Holding Ratio. 

What is a holdings ratio? 

A holdings ratio is essentially the different individual stocks that the fund has in its basket.  A tech focused stock therefore, would have tech companies make up a majority of its holdings ratio.  Knowing your fund’s holding ratio tells you what you are investing in, and whether or not the fund's investments are in line with their stated investment thesis, and your personal approach.

How to Check your Mutual funds holding ratio. 

Generally, brokers will put up these statistics, complete with graphical designs etc on their websites and apps itself, for you to view what companies the mutual fund has invested in. 

You can open your discount broker app, make your way to your mutual fund of choice and scroll down, where you will see the names of a number of stocks, with percentage markers etc next to them. These are the holdings ratio of your mutual fund of choice that you might make an SIP investment in. 

It is also worth cross checking this data on various sites that are not discount brokers, so that you can make sure you have double checked and validated your information. 

Conclusion. 

Investing in Mutual funds can be a great way to save time while paying a small fee to still get returns. However, this does not mean you should know nothing about your fund, and the holdings ratio is one of the most basic things to keep in mind before you open a demat account to begin your lump sum or SIP investment journey with mutual funds. 

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