Know How To Choose Best Mutual Fund

Of late, mutual funds have emerged as one of the most preferred investment instruments among all types of investors. You can not only gain attractive returns over the time, but also diversify your portfolio by investing in different types of mutual funds such as debt, equity, and hybrid funds.That being said, choosing the right mutual fund for your investment is very crucial. Not all mutual fund schemes are suitable for everyone.

1. Choose the mutual fund which aligns with your long-term goals You might be investing in a mutual fund with an objective in mind such as creating a corpus for your child’s education, your retirement, or accumulating emergency funds. Therefore, before investing in a mutual fund, the first thing which you should check is whether it will help you to accomplish your long-term financial goals or not.{2D743194-97C2-43F9-BC28-AEC370801ECD}
2. Look at past performance of the mutual fund Though there is no guarantee of returns on mutual fund investments, the past performance of a fund can help you determine the approximate returns that you can generate by investing in it. Therefore, before investing in a mutual fund, you should evaluate its performance for at least past 3 years and also the consistency in returns.
3. Look at the track record of the fund manager The fund manager of a mutual fund plays a decisive role in its performance. If a mutual fund has constantly outperformed its benchmark indices, it means that its fund manager is doing a great job behind the curtains. Therefore, before investing in a mutual fund, do a research about its fund manager to gauge his/her ability to perform consistently.
4. Check expense ratio, exit load, and tax implications The quoted returns may not be the actual returns provided by a mutual fund to the investor. Factors like expense ratio, exit load, tax implications etc. can bring down the returns significantly. Therefore, before investing in a mutual fund, it’s crucial to check these factors and opt for the one which can provide higher returns even after adjusting these expenses.
5. Consider the size and pedigree of the AMC Some mutual funds may look attractive due to their performance in the recent past. However, you should not get lured by such funds if they do not belong to a reputed Asset Management Company (AMC). Invest in funds only which are managed by AMCs that have been in business since at least 15 to 20 years. Otherwise, you could lose your money during the volatile market.

Though mutual funds have the capability to deliver high returns, don’t forget that its performance is subjected to market risks. Therefore, invest in only those funds which you think can withstand market fluctuations and provide decent returns in the long time.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.