Selection of Right kind of Mutual Fund

How to make right selection of FUND

How to select right kind of mutual fund to manage the portfolio? This is the biggest question comes in to the mind of  investor when he first decide to invest via mutual fund mode. Most of time an investor select mutual fund on the basis of its performance. Usually an investors just try to keep safe distance from those mutual fund which underperformed and focus to invest in those which either outperformed or in balance. While choosing the mutual fund on the basis of previous performances mutual fund investor often select wrong product and get a big hole in your pocket as we can say that in  fact there is no mutual fund as such which we can say that it’s the best one and investor can invest blindly in it. Or in other words we can say each and every individual have different risk taking ability, age and their aims and financial  goals which they tend to meet by managing portfolio in better way.

To select a mutual fund there are so many factors which need to consider like charges, downside risk, consistency in performance including past performance of Mutual fund.

To select a right mutual fund for their portfolio and investor can take a look for these small things and make huge money.

Identify investment objective 

Investor first need to identify their investment objective and for how long he needs to keep investment what’s his risk taking ability.

For example if Mr. A plans to buy a car in next 3 years then time horizon for Mr. A is 3 years and his goal is to buy a car.

Or saving for retirement then it’s a long term objective

Investors own objective should be clear while making and investment.

Understand the objective of Mutual fund 

Every fund has it own objective and strategy of investment. If we understand the objective these then we are able to understand how the fund manger operates the fund. And make sure your objective is prime and should match the objective of the fund you choose.  

Category of fund 

Based on investment plan decide the category of fund in which you want to invest from debt, equity or hybrid category. If you wish to invest in equity category then select out of large cap, mid cap or medium cap or if decided to invest in debt fund then there comes short term, long term or the medium one choose according to your capabilities which suites you. Select as per the need.

Performances of fund

After finalizing the category compare that fund with other funds which are in same category look for consistency in fund performance as well. Compare past performances, comparison with peer set and benchmark, volatility measures and risk adjusted performance of the fund, fund size, expense ratio of the fund etc. Also go for the annualized growth and compounded growth of that fund. By this you can see and understand the volatility in between various mutual funds actual growth, rate and return. 

In short we can say that to select a mutual fund performance of that fund is the basic tools but we should consider other factors like charges, downside risk, cost of fund management, exit and entry load as well as consistency in performance and also I would like to suggest go for in depth before investing do great research and then invest. Because we invest to meet our personal and financial goals, not for entertainment.