Investment Knowledge: If you understand these 3 things then your money will never sink, investors will get strong returns..

As soon as there is a slight movement in any corner of the world, the stock market starts fluctuating. In such a situation, investors look for an option that can give strong returns while reducing the risk. If you are also looking for such an option as an investor, then a multi-asset fund can prove to be the best bet. ICICI Multi Asset Fund has given tremendous returns to its investors for the last several years, that too without much risk. In such a situation, investors have to understand 3 formulas, by which they can reduce their risk and get more returns.

The most important aspect that is measured while analyzing the performance of any mutual fund is how much return the scheme has given at different times. Most importantly, the main measure of rolling returns over several time frames tells us the stability of the fund. For example, the 5-year rolling returns of a fund over 10-15 years are used to measure ratios such as average, medium, minimum, and maximum returns.

Keep an eye on the Sharpe ratio.
As per mutual fund standards, ICICI Prudential Multi-Asset Fund is very unique in its category. If we look at its Sharpe ratio, it is measured by calculating the excess return over the risk-free rate and dividing it by the risk taken. The higher this ratio, the better the risk-adjusted return. The Sharpe ratio of ICICI Prudential Multi-Asset Fund is 0.63, which is the highest in this category (the average ratio in the category is 0.42).

It is important to know the Sortino ratio.
The Sortino ratio is used to measure the downside risk-adjusted. This ratio is obtained by arriving at the excess return of the fund over the risk-free rate and dividing it by the standard deviation of the negative return. Here too, ICICI Prudential Fund performs the best and is much higher than the category average. The Treynor ratio is the excess return of the fund over the risk-free rate for each unit of market risk. Here, the market risk is the beta. A higher ratio indicates that the fund can generate better returns for the market risk it takes. The Treynor ratio of this fund is 2.72, which is much higher than the category average of 1.68.

Don't ignore up/down capture.
The next key parameter to judge a fund's performance is up/down capture. The upside capture ratio of a fund indicates how much its NAV grows during a rally as compared to the benchmark. The downside capture ratio indicates how the scheme's NAV falls as compared to the benchmark. Hence, an up/down capture ratio greater than one indicates that the fund performs well during a rally and falls less during a correction.

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