Mutual Funds is a beneficial investments for retail investors. With plethora of choices one can create an investment portfolio as per requirement. Also, the small amount of regular investments makes it possible for retail investors to participate in different markets and accumulate for creating their wealth. But the bigger task is analyzing the right category of scheme and a mutual funds factsheet is one of the documents where investors can search for detail information. However, it contains many terms which at times are beyond the scope of one’s knowledge and so many ends up looking only at the returns. 
Here I have tried to simplify the terms used in Equity MF Schemes in the factsheet and how does it help in your mutual funds selection process:
1. Beta: A Beta of any scheme will measure its sensitivity in relative to its benchmark. Put simply it means if the benchmark moves due to market fluctuation, how much your scheme performance will swing in relation to it. So a beta of 1.2 will indicate that if the benchmark moves by 10%, the fund NAV will move by 12% either ways. A fund with a beta of more than 1 considered to be highly volatile.
2. Standard Deviation– A standard deviation measures the risk of a particular scheme. It tells you the variation of the individual period performance from the average/mean i.e. if you are taking monthly returns than a standard deviation will tell how much each individual month performance has varied from the average of all the months’ performance. The higher it will be the more volatile the fund is but it no way signifies that it is a bad fund.
3. Sharpe Ratio: This is one of the important measures for mutual funds scheme comparison. A Sharpe ratio gives you the risk adjusted returns of the scheme i.e. how the fund has delivered returns in line with the risk it has taken and is generally in the form of a number i.e. .50. But this tool has no significance in isolation and can be used only in comparing scheme within the same category. So if you want to compare within large cap or mid cap schemes, this tool is highly effective. A higher Sharpe ratio generally indicates the funds superior performance from the rest, although there can be other scenarios.
4. Portfolio Turnover Ratio– A portfolio turnover ratio is given in % or n times and indicates how much times the portfolio have been churned in a year. A higher portfolio turnover generally increases the volatility and cost of the scheme which may the reason for a bad performance if the churning is too high. However, even some of the good scheme with superior performance have high turnover ratio while even bad schemes may not have a high churning. But by looking at this parameter one can analyze the volatility of the fund.
5. Alpha: This factor indicates the performance that has been delivered above your expected lines. So if you expected a return of 10% and fund delivers 12% the 2% extra is the alpha. In most terms it determines the skills of the fund manager who is able to deliver you above your expected performance.
There will be other terms which you may find in a factsheet but these are the basics and the cornerstone of analyzing an equity mutual funds scheme. I will cover details on terms used in debt schemes next.
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