How to select the best Mutual Funds?

People have various financial goals and statuses. Some are wealthy and can afford to invest in schemes with returns by maturity. Others need funds immediately to meet their needs and invest in short- or mid-term investment schemes. Since everyone is responsible for meeting their families needs, they compromise on unimportant costs and focus on future needs.

Mutual Fund Investment is the best way to build wealth in the long term. Numerous schemes make it difficult for an ordinary person to understand which is better and suitable according to their investment goals. The following are the parameters to identify the best Mutual Fund:

Corpus size

Usually, when people filter Mutual Funds, they refer to the historical returns. It is safer to use Asset Under Management to check the fund’s authenticity while they invest online. It is the number of investors that have invested in that scheme. The corpus should not be too high as it weighs down the scheme growth, nor should it be too small, making risk diversification impossible. Place a lower cap of Rs. 1,000 crore and an upper cap on the AUM according to the fund type.

Historical performance

Investors should check the fund’s historical performance in three, five, seven, and 10 years. A longer time frame depicts how it performed in different market scenarios. Compare it with its benchmark and peer group to see whether it consistently outperforms them.

Expense ratio

Investors pay an annual charge to Asset Management Companies for managing their online Mutual Fund. They should check the expense ratios of the selected schemes and pay no more than the average expense ratio.

Fund manager’s reputation

The fund manager plays a crucial role in the performance of the fund. They are the ones in charge of handling the investors’ funds. Therefore, check the education, experience, and performance of other funds. Also, understand their investment philosophy.

Schemes matching the risk profile

Lastly, investors should select schemes based on their risk profile and time horizon for the goals. Aggressive investors can invest in Multi-Cap and Mid-Cap Funds, while moderate ones should invest in Large-Cap and Balanced Funds. For conservative investors, investing in Debt and Balanced Funds is vital.

Those who wish to invest in Mutual Funds should remember these points and choose their fund managers based on their services. They can also build a corpus from their returns and use it for emergency expenses by transferring funds online.

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