Rs. 100- Rs. 10 crore
Start investing with Rs. 100 | Easy KYC | Expert-managed funds
Why Invest in Mutual Funds Based on Past Performance
In summary
Past performance is one factor you can consider when evaluating a mutual fund. Reviewing different periods can help you understand consistency and how a scheme has performed during changing market conditions.
- Past performance does not guarantee future returns.
- Compare a fund with its benchmark and similar funds.
- Review performance across 1, 3, 5, and 10-year periods where available.
- Check the fund's investment objective and strategy.
- Review the portfolio and its diversification.
- Consider the fund's Riskometer and your risk tolerance.
- Check the expense ratio and applicable exit load.
- Consider changes in the fund manager or investment approach.
- Avoid choosing a fund only because it recently delivered high returns.
For example, a fund that delivered 18% in one year may not produce the same result in another period. A longer review can provide more context.
The Bajaj Broking website provides access to 4,000+ mutual fund schemes, subject to applicable availability and scheme terms.
Why do investors look at past performance?
Past returns are easy to find and compare. This makes them one of the first things many investors examine when researching mutual funds.
Past performance can provide useful information about how a scheme has behaved during earlier market conditions. However, it should be treated as historical information rather than a forecast.
It provides a record to compare
Historical returns give you a measurable record of how a scheme performed over a particular period. You can compare these returns with the fund's benchmark and similar schemes.
It helps investors understand consistency
Looking at several periods can provide more context than looking at a single year's return. A fund's performance across 1, 3, 5, and 10 years, where available, can help you assess how consistently it has performed.
It makes initial comparison easier
Comparing returns is generally simpler than analysing every aspect of a mutual fund. However, returns alone do not show the level of risk taken or whether the fund suits your financial goals.
Why should you not rely only on past performance?
Past performance can be useful, but relying on it alone can leave out important information.
Future market conditions can be different
Markets are influenced by factors such as economic conditions, interest rates, company earnings, and investor sentiment. The conditions that supported a fund's earlier performance may not remain the same.
Fund management can change
A fund's investment decisions are influenced by its fund manager and investment strategy. Changes in the management team or strategy can affect how the scheme is managed.
You can review information about fund managers, but their previous performance should not be treated as a guarantee of future results.
High historical returns can come with higher risk
A fund that delivered strong returns may also have experienced significant fluctuations. The return figure alone does not show how much risk was taken to achieve it.
Check the scheme's Riskometer and consider whether its risk level is suitable for you.
Costs can affect investment outcomes
The expense ratio represents the expenses charged for managing a mutual fund scheme. An exit load may also apply when you redeem units under specified conditions.
You can learn more about expense ratios and exit load charges.
Recent top performance can encourage performance chasing
A fund that has recently delivered strong returns may attract attention. Choosing a scheme mainly because of its recent performance can result in you overlooking its risk, portfolio, costs, and suitability for your goals.
How should you check mutual fund performance?
A more complete performance review looks at several measures instead of relying on one return figure.
Compare the fund with its benchmark
A benchmark is a reference index used to assess a fund's performance. Comparing a fund with its relevant benchmark helps put its returns into context.
You can also learn more about performance of mutual funds when reviewing historical results.
Compare similar funds
Compare a scheme with other funds in the same category. For example, an equity fund and a debt fund have different objectives, portfolios, and risk characteristics, so comparing their returns directly may not provide useful information.
Review different time periods
Look at performance across multiple periods rather than focusing only on the most recent year. This can help you understand how the scheme behaved through different market conditions.
Check risk-adjusted measures
Risk-adjusted measures provide additional context to returns.
- Sharpe ratio: Indicates the return earned relative to the level of risk taken.
- Standard deviation: Shows how much a fund's returns have fluctuated.
- Beta: Indicates how the fund's volatility compares with its benchmark or market reference.
These measures should be considered alongside the fund's objective and portfolio rather than used in isolation.
Review portfolio turnover
Portfolio turnover ratio indicates how frequently securities in a fund's portfolio are bought and sold. A high turnover ratio may indicate more frequent trading, so consider it alongside the fund's strategy and performance.
What else should you check before investing?
Past performance is only one part of evaluating a mutual fund. You should also consider the following factors.
| Factor | What to check |
|---|---|
| Investment goal | Whether the fund's objective matches your financial goal |
| Investment horizon | Whether you can remain invested for the required period |
| Risk | The scheme's Riskometer and your ability to tolerate losses |
| Portfolio | The securities, sectors, or asset classes held by the scheme |
| Benchmark | How the fund has performed against its relevant benchmark |
| Costs | Expense ratio, exit load, and other applicable charges |
| Fund management | The fund manager and investment approach |
| Historical performance | Returns across different periods and market conditions |
Last updated: September 2026
You can also review the mutual fund portfolio to understand the assets and sectors in which a scheme invests.
Consider your investment goal
Your goal can influence the type of mutual fund and investment horizon you consider. A fund suitable for a long-term goal may not be appropriate for money you may need in the near term.
Consider your risk tolerance
Different mutual fund schemes carry different levels of market risk. SEBI's Riskometer classifies schemes as Low, Low to Moderate, Moderate, Moderately High, High, or Very High.
The Riskometer communicates the scheme's risk level. It does not predict returns or guarantee that you will not lose money.
Review the investment strategy
Understand what the fund aims to achieve and how it invests. This can help you determine whether the scheme's approach is consistent with your investment objective.
How does past performance fit into your decision?
Past performance should answer one question: How has this fund behaved historically?
It should not be used to answer another question: What return will I definitely receive in the future?
For example, suppose Ananya is comparing two equity mutual funds.
| Fund | 1-year return | Key consideration |
|---|---|---|
| Fund A | 18% | Higher recent return, but needs further review |
| Fund B | 12% | Lower recent return, but also needs further review |
Amount: returns shown as percentages.
Last updated: September 2026
Ananya should not automatically choose Fund A because its one-year return is higher. She could compare both funds across several periods, review their benchmarks, portfolios, Riskometers, expense ratios, and investment strategies.
If Fund A took considerably more risk to generate its higher return, the 18% figure alone would not tell Ananya whether the fund suits her.
This illustrates why historical returns are better used as one input in the evaluation process, rather than as the sole reason for investing.
How can you invest after evaluating a mutual fund?
Once you have identified schemes that match your requirements, complete the applicable KYC process and review the scheme-related documents before investing.
The Bajaj Broking website provides access to 4,000+ mutual fund schemes across categories, subject to applicable availability and scheme terms.
Choose between SIP and lumpsum
You can invest through an SIP or lumpsum, depending on your circumstances and the scheme's terms.
An SIP involves investing a fixed amount at regular intervals. A lumpsum involves investing a larger amount at one time.
You can learn more about SIP Vs Mutual Fund and Lumpsum Investment.
Use calculators to understand possible outcomes
You can use the mutual fund calculator, SIP calculator, lumpsum calculator, or step-up SIP calculator from Bajaj Finance to illustrate potential investment outcomes.
Calculator results are estimates based on the inputs used and do not guarantee actual mutual fund returns.
Conclusion
Past mutual fund performance can provide useful information about how a scheme has behaved historically, but it cannot predict future returns.
For a more complete evaluation, compare performance across different periods and consider the fund's benchmark, portfolio, investment strategy, Riskometer, costs, fund management, and suitability for your financial goals.
The Bajaj Broking website offers access to 4,000+ mutual fund schemes, allowing you to explore different categories and compare available options.
Last reviewed: September 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
Explore Investment Tools
Articles and Insights
Frequently Asked Questions
Understanding historical performance
Comparing mutual fund performance
Reviewing your investment
What is wrong with choosing a mutual fund based only on past performance?
Past performance does not guarantee future returns. A scheme's future performance can be affected by changing market conditions, portfolio decisions, investment strategy, costs, and other factors. Historical returns are therefore better considered alongside risk, portfolio composition, benchmark performance, and your own investment objectives.
Does past mutual fund performance guarantee future returns?
No. Past performance shows what happened during earlier periods. It does not guarantee that the same return will be achieved in the future.
How do I check the past performance of a mutual fund?
You can review its historical returns across different periods and compare them with the relevant benchmark and similar funds. You can also examine its portfolio, risk level, costs, and investment strategy.
What is a suitable benchmark for a mutual fund?
The relevant benchmark depends on the fund category and investment objective. Comparing a scheme with its applicable benchmark and similar funds can provide useful context when assessing historical performance.
How often should I review my mutual fund performance?
A periodic review can help you check whether the investment still aligns with your goals, investment horizon, and risk tolerance. You may also review it when your financial circumstances or investment objectives change.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.