|source - hdfcsec.com|
Mutual funds are the primary and most buzzing investment ideas at present. If you start investing with having a goal in mind, along with if you will remain with it in a disciplined way, there are most chances that you will meet to your goal in pre-decided time. But before investing in any mutual funds you need to check out the following things.
1) Last 5 years performance:-
5 years is a time frame considered as enough long time in the stock market to check the performance of any stock, so it is in mutual funds we need to consider the last 5-year performance. During this period your desire mutual funds return needs to be a minimum of 10-12%. That’s the basic criteria for investing in mutual funds…Otherwise, there are risk-free investment options available who give 6-8% returns. If your mutual fund outperforming the respective index in 5 years, it’s a first yes sign to invest in any mutual funds.
2) Expense Ratio:-
Expense ratio is the amount that mutual fund earning for managing your funds, it is included in your fund’s NAV. Example – if your mutual fund's expense ratio is 2% and you invest 1 lakh Rupees in a year so you will pay 2000 Rupees as expense ratio to your funds. For longer term more than 2% expense ratio throws a big impact on your wealth.
Entry or exit load is also an extra charge fund are charging, mostly 1% exit load applicable if you withdraw your money before a year.
3) CRISIL STAR Rankings:-
More star means great past performance, generally, you need to go with more than 3-star ratings for the right mutual fund. How these rankings consider it’s a long topic so I will make a separate blog on this.
4) Risk Appetite:-
As you know, high risk means high returns and low risk means low returns.
Riskometer has 5 types of risk
|source - businesstoday.in|
b) Moderately low
d) Moderately High
The moderately high risk you need to take to create wealth more than 5-7% on Inflation.
FD, RD, PPF kind of investments are risk-free investments, but they will give a return of
6-8% which is around or just above inflation.
5) Fund manager:-
Your fund manager is the person who is solely responsible for your money’s growth. It’s not the big name of a mutual fund but it’s the fund manager who will generate wealth for you. There are examples of the same mutual fund houses that have been delivered underperformed and outperformed the respected index in different fund schemes managed by the different fund managers. Always Google fund manager’s past record, qualification and how long he or she has been associated with your fund before investing.
“Mutual fund Sahi hai” but which one finds out by the above checkpoints.
Paisa bolta hai wishes you happy investing.