How mutual fund investors can use ratios to maximise returns

As inflows into mutual funds increase, it is important for investors to understand key ratios before investing in them. According to Nasser Salim, Managing Partner at Flexi Capital, standard deviation and sharpe ratio are some of the key indicators to watch out for.

Standard deviation is one of the most common and important ratios to track. It indicates volatility by measuring how much a portfolio’s return deviates from its average.

"To use standard deviation as a performance ratio, you need to compare two mutual funds belonging to the same category. A high standard deviation indicates a wider range of returns whereas a lower value indicates a narrow range of return and lower risk on return that is being generated," explains Salim.