How to select the right mutual fund scheme

How to select the right mutual fund scheme

Mutual funds are a great way to invest your money and earn good returns in the future. But at the same time, you also know that mutual funds are subject to market risks. It is possible to lose money when you invest in mutual funds. Every advertisement on TV regarding mutual fund performance mentions this. So, how can you select the right mutual funds for your portfolio to achieve investment success?

Well, let’s find out some of the factors you need to keep in mind before selecting a mutual fund

1) Fund performance
Imagine you have a long-term financial goal like buying a house. You know that you want to invest in equity funds. You may be interested in a particular fund. But is that the right choice for you?
One of the first steps is to look at the mutual fund performance ranking. Look at the past reports of the fund to get a better idea of its performance. However, don’t look only at the recent performance. You need to analyse the fund’s performance over a significant period -so that you have adequate information to aid in decision making. This activity helps you get a snapshot of its past performance but it is important to remember that best mutual fund scheme performance is not the sole criterion to select a fund.

2) Experience level of the fund manager
The fund manager’s role is to ensure a mutual fund meets its financial goals at the right time. And to achieve this goal, a fund manager has to move funds accordingly, between different investing instruments. The fund manager has a very important role in the overall performance of the fund. So, as the investor, you need to take a look at the fund manager’s experience and past performance. You can also take a look at some of the other funds under his control. See how these funds have performed to get a better idea of the best mutual fund scheme to invest.

3) Expense ratio
Expense ratio is the annual fee that is charged on mutual funds. This fee can vary between different kinds of funds. This depends on various factors such as the size of the fund and the category of investment. In addition, the investment strategy can also determine the expense ratio of a fund. For example, passive index funds which require limited investment strategy have lower expense ratios. Expense ratio is an important factor to look at because it can have an impact on your profits. Higher the expense ratio, lower will be your returns.

4) Exit load
Exit load is a fee that is collected by the fund house when an investor leaves the mutual fund scheme. This cost is generally deducted as a fraction of your Net Asset Value (NAV). Compare different fund houses and identify which of them offer lower exit loads. This can help you retain a significant portion of your earnings at the time you leave the fund.

The last word

There are thousands of mutual funds in the market. Identifying the right fund for your portfolio is an important task in order to select the best mutual fund scheme for sip. By looking at the above factors, you can select any or a number of the best 10 mutual fund scheme that can help you maximize your returns in the long run.

A number of useful resources are available that can help you to choose the right mutual fund. If you need in-depth guidance and assistance in selecting the right fund according to your risk appetite, you can opt for the expert services of a financial advisor. It is crucial to be restrained, reasonable and stay away from being influenced by short-term price fluctuations in the market. At the end of the day, it is essential to remember your financial objectives and the ultimate goal to build wealth in the end.

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


How to select the right debt asset

Did you know there is a whole different world of investments apart from stocks and equity mutual funds? Welcome to the world of debt investments. If you are interested in a steady income, capital protection and tax benefits, then debt investments are the right choice for you. Public Provident Fund (PPF), bonds, debt mutual funds and gilt funds are some of the popular debt funds available in the market. However, before you invest, there are a few important factors you should keep in mind before considering debt funds.How to select the right debt fund investment:a) Past performancePast performance of a debt fund investment is no guarantee of future performance. Yet, it is important to check out how a fund has performed in the past. This is specific for debt mutual funds and it can help you get a better idea of the fund before you invest. Check how the fund has offered returns over different time periods such as six months, one year or even five years. Also compare the debt fund performance against the benchmark in the sector. For instance, a fund may offer 9% returns and you might think it is the best debt fund for 6 months to invest in. But when you compare against the benchmark, you may find that there are other debt funds that offer better returns. As an investor, you should seek to choosing the right debt fund possible for investment. b) Yield to maturityYield To Maturity (YTM) is defined as the total returns expected on a bond if the bond is held unto maturity. In other words, if you invest in a bond and make all the scheduled payments regularly, YTM is the internal rate of return on your investment. It is expressed as an annual rate. YTM is a good measure to estimate if it is worth buying a bond or not. There are many online calculators to help you find out the YTM of a bond. If you find that the returns on the bond are lesser than your desired yield, it is better to search for a more suitable bond. You can also use YTM to compare different bonds that have different maturities and coupon rates. c) Investment goal of the assetThere are many different debt instruments in the market and each asset has a specific investment goal. That’s why it is important to identify an instrument whose investment goal matches your personal investment goal. For instance, imagine you want a regular income and a low level of risk. For this, it is best to invest in government bonds or gilt funds since they offer regular interest payments and they carry very low risk. d) Withdrawal facilityPublic Provident Fund (PPF) is a very popular debt instrument for many investors in the country. It provides a fixed rate of return and offers a high degree of protection to the invested capital. However, it is important to remember that PPF is a 15 year scheme. You cannot make premature withdrawals or closures without meeting certain conditions. In comparison, a debt mutual fund allows you to withdraw amounts whenever you require. This is not to say that debt funds are better than PPF. Instead, it is to inform that in case of emergency, you should know which assets allow quick access to funds. Make sure you know all about the withdrawal facilities available before you invest. ConclusionAs an investor, your primary goal may be to earn the best returns possible. But that shouldn’t keep you from exploring other benefits. Different assets come with different advantages and disadvantages. By keeping the above factors in mind, you can identify the best debt assets that are ideal for you.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Investing in Mutual Funds: SIP vs Lumpsum

In life, you are often presented with two choices in front of you. It can range from something as simple as: should I take the right turn or the left turn. Sometimes, it can be more complicated like: should I continue with my current job or start my own company. You may not always know which option to choose. But with ample information and the pros and cons of each choice, making your decision gets easier. Same is the case with mutual fund investments. Lots of investors are not sure whether to invest through Systematic Investment Plans (SIPs) or in one go. In this article, you can find out which option works best for you.What is SIP investment?Systematic Investment Plan or SIP is a method of investing in mutual funds. Here, you invest a fixed amount of money in a fund on a regular basis. This could be monthly, quarterly or a semi-annual basis. What is lumpsum investment?In a lumpsum strategy, you invest a large sum of money in mutual funds at one go. For instance, if you have an amount of Rs 5 lakh and you invest it all in one go in a mutual fund, this would be a lumpsum investment.Advantages of SIP1) Ideal for beginnersSIP involves investing a fixed amount of money in a fund at regular intervals. So, if you are a novice investor and you wish to gain exposure to the market, this is the best way to do it. This is because you can invest even small amounts (as little as Rs 500) in a fund each month. And as your income grows, you can consider increasing your investment amounts. 2) Rupee cost averagingWhen you invest steadily in a fund each month, you don’t have to worry about timing the market. When the market is high, you buy lower number of units and when the market is low, you buy a larger number of units. This is known as rupee cost averaging. By investing for a longer period of time, you can earn high returns without strategies like market timing. 3) Investment disciplineIn an SIP mutual fund, you have to invest money on a regular basis. This offers you the opportunity to inculcate investment discipline. And the best part is, you can directly give a standing instruction to transfer a fixed amount of money from your bank account to the fund. As a result, you can watch your funds grow right in front of your eyes.Advantage of lump sum investment1) Ideal for large sumsAs the name suggests, this method is ideal for large sums of money. So, in case you have large amounts of money, it is better to invest in a lump sum instead of letting it lie idle. Businessmen, for example, generally have an irregular cash cycle. For these people, it may be better to invest in lumpsum instead of SIPs. 2) ConvenienceWhen you make a lump sum investment, you only do it once or twice a year. As a result, you don’t have to worry about meeting future payments on a regular basis. 3) Potential for high returnsOne of the biggest advantages of lump sum investments is that you have the potential to earn high returns. For instance, when you invest large sums of money when the market is low, you have the potential to earn high returns when the market rises again. However, this is only possible if you are able to correctly time the market. That’s why, this method is more suitable for more experienced investors who have the ability to stomach market volatility. Conclusion: Which is better?Now, which is better: SIPs or lumpsum? Well, that depends. Both of these options are good. However, based on factors like investment amount and experience, you need to decide which type of investment is more suitable for you. You can also use a strategy to use a combination of both SIP and lump sum to maximise your returns.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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