How to evaluate your Equity Mutual Funds
The key points to consider as an investor before making any investment in equity based mutual funds.
- Investment goals and Risk tolerance.
One of the basic things to be taken into the consideration before making any investment decision on equity oriented mutual fund is whether, it’s meeting with the respective investor investment objective and risk tolerance. In case, an investor wants to earn capital gain more, then it’s better to choose an equity mutual fund where the money remains pooled for at least 12 months. But an investor must have a high-risk tolerance in case of making any investment in an equity fund.
- Mutual Fund’s performance Consistency.
It’s one of the key things to take into consideration from an investor perspective. The consistency in the equity mutual fund returns, matters a lot before making any investment. Rather than looking how the funds return in past 1-2 year, it’s better to look how funds have performed over the past 5 years. It will provide a clear picture whether the fund will give consistent returns or just a whirlwind.
Before investing, it’s quite pre-mandatory for the investor to look out for the fund manager experience. How long he/she has been in the industry and associated with the fund house. It’s also better to look his/her overall performance at the best of time and worst of time. It will be better to compare his/her performance with other fund managers.
Before evaluating any mutual fund, it’s better to look out for the expense factor. Since all the expense incurred in managing the mutual fund scheme is borne by the scheme. Thus, it’s better to look toward, how much proportions of the scheme are swayed by its expenses. Lower the ratio better will be the scheme.