How to Choose the Best Mutual Fund for Yourself?


07 May 2019 | 3 min read

You might have often seen advertisements suggesting people make investments in a mutual fund. It has emerged as a very popular investment option for both long-term and short-term purposes. Although it may appear lucrative when it comes to returning on investment (ROI) in mutual funds, at the same time, it also projects risks and threat. So, as a wise investor, it is always beneficial to make an investment in a mutual fund, which turns out to be beneficial. But the trick to profit lies in choosing the right mutual fund. Read this blog to know about the points that you must keep into account while buying a mutual fund.

Checklist for choosing the best mutual fund:

  1. Fund Manager Tenure – If you are naive to mutual fund investment then you must connect with a fund manager who will help you in choosing the right mutual fund scheme. Thus, the fund manager’s performance and credibility play an important role. Apart from the mutual fund scheme which you would be buying, as a wise investor, you must also analyze other funds. This will help you in understanding how the fund manager is managing the funds and how it is performing.

  2. Fund Performance Comparison – Once you have decided to invest in a particular mutual fund, it is important that you must check the performance of the fund for the past 5 years. For example, you want to invest in mutual fund scheme X then you must compare the similar funds and benchmark. You must collect all the information related to it. In the digital era, collection information becomes easier and you can make the choice of fund easily.

  3. Expense Ratio – If you have decided to invest in a mutual fund then it’s important that you must check the expense ratio. Most of the time, investors ignore the recurring cost and hence have to suffer in the long run. The higher expense ratio may affect the return from a particular mutual fund scheme. Although SEBI has capped the expense ratio it’s always beneficial to go with the scheme which has a low expense ratio. However, you must not take only this factor into consideration while choosing a mutual fund scheme. This factor in conjunction with other factors like return, past record of a mutual fund scheme, etc. must be taken into consideration while choosing the best mutual fund scheme.

  4. Goals - You want to reach your financial goals with mutual funds. Right. Whatever goals you have in your mind – marriage, education or travel, you can choose mutual funds accordingly. Choose the fund that matches your tenure. In case if your goal is around 3 years, consider investing in debt oriented fund. For a period between 3 to 5 years, consider balance funds for investing in.

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