13.4 Selecting a Scheme Across AMCs or Within a Scheme Category

NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

Track your progress as you read

Finished sections get a check mark.

1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

13.4 Selecting a Scheme Across AMCs or Within a Scheme Category

Key Takeaways Explain This Topic AI

Once the category is fixed, comparison must be like for like across fund houses.

Expense ratio is the only comparison factor whose effect is certain in advance.

Rolling returns reveal consistency far better than a single trailing return.

Portfolio characteristics such as capitalisation split and rating profile show what risk is actually taken.

Fund house process, risk management and manager stability matter alongside scheme-level data.

Last updated: August 2026

The Comparison Must Be Like for Like

Once the category is decided, every scheme in it faces the same constraints and the same Tier 1 benchmark, which is what makes comparison possible. Three conditions must hold:

Same category , so mandates are comparable
Same periods , so market conditions are identical
Same measure , computed on a total return basis for the benchmark

A comparison violating any of these is not a comparison.

What to Compare
1. Expense ratio — the only certain factor

Cost reduces return every year with certainty, while skill may or may not appear. Within a category, compare the total expense ratio of the same plan type — regular against regular, direct against direct.

Note the change from 1 April 2026: the regulatory cap is now the Base Expense Ratio excluding statutory levies, and Total Expense Ratio is BER plus brokerage plus regulatory and statutory levies. Two schemes with the same BER can present different TERs if one trades far more. Compare BER to understand charging policy; compare TER to understand what the investor bears.

2. Rolling returns rather than trailing returns

A trailing return describes the experience of one investor who happened to start on one day. Rolling returns compute the same window from many overlapping start dates, showing the range and consistency of outcomes.

Scheme 5-year trailing Rolling 3-year: worst Rolling 3-year: best Percentage of periods above 12%
A 16.2% 4.1% 24.8% 62%
B 15.8% 9.6% 20.3% 78%

Scheme A wins on the trailing number. Scheme B is the better holding for most investors — a materially higher floor and greater consistency, which is what determines whether an investor stays invested.

3. Performance against benchmark and peers

Against the Tier 1 benchmark on a TRI basis, over multiple periods, and against category peers , since the category and the benchmark can diverge.

4. Risk-adjusted measures

Sharpe, Treynor, alpha and information ratio, compared within the category over identical periods and over at least three years.

5. Portfolio characteristics

This is where the real differences appear.

Metric What it reveals
Market-cap split (equity) Whether a flexi cap scheme is genuinely flexible
Number of holdings and top-10 weight Concentration
Sector weights vs benchmark Active positioning
Portfolio turnover Trading intensity and the cost it imposes
Modified duration (debt) Interest-rate sensitivity
Rating profile (debt) Credit risk actually taken
Yield to maturity (debt) Risk being taken, not return promised
Portfolio overlap Whether a distinct strategy produces a distinct portfolio

Two schemes with the same category label and similar returns can be running entirely different risks, and only these fields reveal it.

6. Scheme size

Matters differently by category. A very large small cap scheme faces genuine capacity constraints, since building or exiting a position in a less liquid stock moves its price. A very large large cap or index scheme faces no such problem and benefits from lower expense slabs. A very small scheme carries the risk of merger or wind-up.

7. Fund house and manager factors

Investment process — is there a documented, repeatable process, or does performance depend on one individual?

Risk management — the credit-event record of the fund house's debt schemes is the most revealing evidence here

Fund manager tenure and stability , and the manager's record across all schemes managed, which must be disclosed

Service quality — statements, transaction processing, grievance handling
Compliance record
Comparison Framework

Factor Weight Why
Expense ratio High Certain effect, compounds
Rolling return consistency High Predicts investor experience
Portfolio risk characteristics High Reveals risk actually taken
Risk-adjusted returns Medium Meaningful over 3 years or more
Fund house process and risk record Medium Affects reliability over time
Trailing return ranking Low End-point sensitive; rotates
Scheme size Contextual Depends on category

The lowest-weighted factor is the one most commonly used. A one-year ranking is the weakest evidence available and is the basis on which most retail switching occurs.

Diversifying Across AMCs

Holding across two or three fund houses reduces dependence on a single organisation's process and risk management, which matters most on the debt side, where a single credit event can affect a scheme materially.

But spreading across many AMCs within the same category adds administration without diversification, since the underlying holdings overlap substantially. Two or three well-chosen fund houses is generally sufficient for a retail portfolio.

A Practical Shortlisting Routine

Fix the category from the goal, horizon and risk profile.

List schemes in that category with a track record of at least three years .

Eliminate those in the highest expense quartile unless there is a specific reason.

Compare rolling returns rather than trailing returns.

Examine portfolio characteristics to confirm the risk taken is what the mandate implies.

Check risk-adjusted measures over three and five years.

Consider fund house process, manager stability and risk record .

Select two or three schemes across different fund houses .

Document the basis for the recommendation.

Review annually , and act only on a change in the scheme or in the investor's circumstances — not on a change in the ranking.