Two documents carry everything a retail buyer is entitled to know, and both are written for skimming. The scheme information document is the constitutional text: mandate, asset allocation ranges, benchmark, load structure, risk factors and the fee schedule. The monthly factsheet is the operating report: current portfolio, current expense ratio, returns, and a small set of statistics.
Four things are worth extracting, in this order.
What should you check first in a factsheet?
Start with the benchmark and its variant. A fund's benchmark is a claim about what it is trying to beat, and the mischief is usually in the variant. A price return index excludes dividends. A total return index includes them. Benchmarking an equity fund against a price index hands the manager the dividend yield as free alpha every year. India mandated total-return benchmarking for mutual funds because the practice was widespread [verify: SEBI circular on benchmarking of mutual fund schemes, sebi.gov.in]. When you read any performance claim, in any market, the first question is whether the two sides of the comparison are the same kind of return. The full treatment of benchmark validity, including the seven properties a benchmark must satisfy, belongs to the performance-measurement material in the asset-allocation branch.
Then the expense ratio, and which plan it belongs to. Factsheets frequently print both plans' ratios in small type, so check that the one you're quoted is the one you'd actually buy.
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Why does portfolio turnover matter?
Portfolio turnover is third, and it's the line nobody reads. A ratio of 1.35 means the fund replaced the equivalent of 135% of its portfolio in the year, an average holding period of 8.9 months. Turnover costs money that does not appear in the expense ratio at all. Brokerage, taxes and the spread are borne by the scheme and show up only as a slightly lower net asset value. At a round-trip cost of 35 basis points, a turnover of 1.35 implies a trading bill of 47.25 basis points a year, which on a ₹5,00,000 holding is ₹2,363 a year that no disclosure line will ever show you. Turnover also tells you about the manager. A fund whose mandate is long-horizon quality and whose turnover is 1.35 is telling you something about itself that its marketing is not.
Why do rolling returns matter?
The fourth is the return record, and it must be a rolling one. A point-to-point return is a single sample of a distribution, and a fund house choosing the two endpoints is choosing the sample. Take eight annual returns of +31%, −9%, +22%, +4%, −14%, +28%, +11% and +19%. The point-to-point compound return over the full eight years is 10.35%, which is the number that goes on the poster. Slice the same series into every three-year window and you get six windows returning 13.30%, 4.91%, 2.95%, 4.61%, 6.91% and 19.13%. The worst three-year window is 2.95% and the best is 19.13%, a spread of 16.18 percentage points. Every one of those windows was a real experience for somebody who invested on that day.
The point-to-point figure is no lie, only a summary of one path through a distribution whose width is the thing you needed to know, and the rolling view is how you recover the width. Ask for it, and where a fund does not publish it, build it yourself from the net-asset-value history.
What does the riskometer tell you?
The riskometer is the fifth item, and it deserves one paragraph of scepticism. It is a mandated pictogram placing a scheme on a scale from low to very high risk, computed from a defined methodology over the scheme's portfolio and reviewed monthly [verify: SEBI circular on product labelling in mutual fund schemes, sebi.gov.in]. It is useful as a floor, because it stops a fund selling credit-risk paper as a low-risk product. It is close to useless as a discriminator, because almost every equity scheme sits in the same bucket. Use it to check that the label is not fraudulent, and make the choice on other grounds.