In contemporary milieu, mutual funds have become one of the safest, and the finest modes of investment. Here, your money is professionally managed by fund managers in different high-risk and low-risk profiles. In MF, you can start investing from just Rs. 500 and go higher as per your resources. MF is usually run by a number of asset management companies, which bring together a group of people and invest their money in different high-risk and low-risk schemes.
Choosing the best mutual fund scheme from a number of funds available is a difficult process. However, to make this process simpler, you must first be clear of the things such as why you want to invest in MF? How much risk can you easily afford? And what/how much return do you expect from your mutual fund's investment? These are some questions that will help you choose the most appropriate funds as per your requirements. Try to get into the details of every MF scheme. For instance, try to get into the history as in how the MF scheme has performed in the last couple of years. Also, take a look at the performance of the scheme against its peers. Listed below are some other parameters that one must look for when choosing the best scheme for Mutual Funds investment:-
- Performance ranking: It is the first thing that you must keep in mind when deciding on the best MF scheme. Generally, people choose the mutual fund on the basis of past performance or simply consider the recent performance. However apart from this, one must also check the fund’s ranking among its peers. Quartile ranking is one of the best ways to check how the fund has performed in the last couple of years. In quartile ranking, each quartile represents 25% of peer group schemes and if you find your scheme lines lower than 3rd quartile in the last couple of quarters, it is an intimation that you must not invest in that particular scheme. You can find these rankings on asset management companies’ website and also on MFs research website.
- Total expense ratio (TER): It is one of the main ratios that look after the fund manager’s fee, administration and other operational expenses. This means, if the total expense ratio is high, it will affect your returns adversely and if it is low, you are likely to get good returns from your MF investment. This is why it is important to look at the total expense ratio of the scheme before making an investment.
- The experience of fund manager: The total experience of a fund manager is also an important aspect to consider. This is because fund managers are the decision-makers and therefore, their experience, viewpoint and knowledge about the particular fund counts a lot.
- Look for the scheme asset size: Prior to investing in an MF, you must also look at the scheme asset size. Generally, the parameters for debt and equity funds are different. In debt, the comfortable asset size is thousands of crore which is way more than equity funds. In fact, 90 percent of the total Asset Under Management (AUM) of the mutual fund industry is in debt funds, so your selected fund scheme should also have considerable (AUM). Less AUM will be risky for any investment.
These are quite a few essential parameters that you must think of while choosing the best mutual fund scheme. The mutual fund ensures good returns in long-term investment. It is easier and the safest investment method wherein you can keep a track of your investments, and the allied returns online with mere few simple clicks.
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