Are you thinking about investing in Mutual Fund? But do you know on what basis one should select a scheme. Below we discuss a few pointers which investors can use to select mutual fund schemes -
1) Identifying Goals and Time horizon to achieve these goals: An individuals must identify his/her goals and the time period within which the person wants to achieve his goals before putting their money in a mutual fund scheme. Once the person identifies his desire he/she can accordingly choose a appropriate scheme.
2) Risk Tolerance: Identifying the risk capacity is as important as identifying the goals before make any investment in mutual fund. Suppose if an individual as a capacity to take moderate risks then such investors can put their money in Balance funds and not in Growth because the risk level in Balance fund is quiet less then Growth fund.
3) Past Performance: The ultimate goal is returns. Investors should look at returns given by the fund during different time periods and compare them with the benchmark. For equity mutual funds, check the long-term performance, while for debt funds look at returns over the short to medium term.
4) Recurring Expense or Fees: Other than the amount of investment a person as to bear some additionally charge such as Management Fee, Exit load etc. Although the fee amount is quiet less but it will reduce your return when individual holds the fund for a long period of time. Ideally, the bigger the size of fund, the lower is its recurring cost.
5) Fund Manager: It is important to know the fund manager as well because the fund manager is the one who manages the entire corpus. If the fund manager has expertise over different investment categories and fund styles, it can be considered an advantage by investors, since it may help him design a portfolio that is efficient.
6) Be Disciplined: It is necessary that one should invest in mutual fund in discipline manner as it would help to achieve good return from the investment. Set up a schedule for adding units while being careful to keep cash for emergencies. Investing at regular intervals will reduce the risk of volatility. Consider SIPs.
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