5 Things to consider whilst selecting a Mutual Fund Scheme
Most of us fall into the trap stating that selecting a mutual fund scheme is next to buying an ice-cream with so many other options available. Is that so? Can you really select without the help of any pro hand or a lover of an ice-cream? What makes it more tedious is volatility in the performance of a mutual fund. There are some people that end up buying a mutual fund scheme only on the basis on the rankings.
Readers! Grabbing your attention over here — curious to ask if the rankings of a mutual fund are 100% correct, then all financial advisors and portals should suggest the same to their readers or clients. Not to forget, you will find large variation in the rankings, nothing is fixed. As mentioned earlier, volatility in performance is another problem. A star performer mutual fund this year might turn out to be worst performing fund following year. Make sure to review the investment portfolio every few months. Therefore, whilst selecting a mutual fund, make sure you follow up some of the points in mind. You can thank us later!
- Investment Objective: Before selecting any fund, make sure you identify the objective of your investment. The purpose can be anything — from buying a house to ensure regular savings for your retirement. The objective of every fund is different so take your pick accordingly.
- Past Performance: Simply comparing all the past performances never works unless you have the luck to get valuable returns whilst selecting any scheme. TIP: Instead of just limiting the fund’s performance to the recent past, try to compare over the last 3–5–10 years. This will give you the clarity.
- Expense Ratio: Fund’s expenses are eventually borne by its investors; a lower expense ratio will keep more money for you in that fund for future, therefore, higher growth. TIP: Be aware of the investment charges (if, any) you will be paying to the house of a mutual fund. Onetime fee is levied whilst investing.
- Fund House Reputation: Prefer selecting a mutual fund which has a strong investment base and has experienced fund managers. An incomplete knowledge can turn out to be a crisis. A fund house with healthy experience across market cycles has more tendency to tide over the future.
- Liquidation: When you select a fund, make sure you are aware of how soon it will be liquidated to have cash in hand, especially in an emergency.
- KNOWLEDGE BASE: ELSS funds are tax savings and have a lock in period of three years. Thus, it’s important to consider every aspect before selecting a fund.
Like said, we hope to make you understand the therapy of selecting a mutual fund scheme. Try to research every financial institution and then take a call.
Till then, Have a Healthy Investment!
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.