If you want to invest in equity mutual funds, then you cannot take the risk that the value of your investment may decline. You have to choose funds that have a balance between return and risk.
Mutual Fund Investment: A large number of investors are entering mutual funds these days. Especially the number of people investing in it through SIP is increasing continuously. According to the latest figures, on an average 1 lakh SIP accounts are being opened every month. Whereas a year ago only ten thousand SIP accounts were being added. If you consult a financial advisor, he will ask you to invest in mutual funds through SIP to invest money in equities.
Through mutual funds, money can be invested not only in the stock market, but also in debt, gold and commodities. But if you do not have much understanding of the stock market or cannot take the time to monitor your money invested in it, then investing in mutual funds is definitely a good medium.
Now the question is how to choose mutual fund? Because thousands of mutual fund schemes of dozens of companies are present in the market. These things should be considered while choosing the right mutual fund.
1.Choice of Mutual Funds
First of all, you have to decide for what purpose you want to invest, then how much you can invest and for how long you can stay in it. If you want to invest for a year or two, then there will be separate mutual funds for that. If you want to invest for five, seven or ten years or more, then there will be other mutual funds for that. If you are investing for a short term, you can choose debt funds or liquid funds. If you are investing for the long term, then equity mutual funds will be right.
2. Ability to take risks
Decide how much risk you can take for this investment. For higher returns, you have to take more risk. But not only the return in investment, there should also be protection of your capital i.e. capital. For example, if you want to invest in equity mutual funds, then you cannot take the risk that the value of your investment may decline. You have to choose funds that have a balance between return and risk.
3. Be sure to check the past performance of the fund
It is not necessary that the fund will continue to give returns like the one given earlier. There is no guarantee that even if a fund has performed well so far, it will continue to perform well. But from the past performance of different funds, you can get an idea of which one is consistent. The ups and downs in its performance are not very different from the market and the economy. This will help you choose your preferred scheme and mutual fund. You can also check the ratings given by different rating agencies to these funds
4. Look at Expenses
While choosing any mutual fund, definitely see what are the expenses associated with investing in it. The expenses you have to look at are entry and exit load, asset management charges, expense ratio. Be sure to also check the asset management charges and expense ratio as all these expenses reduce your profit. An expense ratio of up to 1.5 per cent is considered reasonable for a mutual fund, but avoid investing in funds with an expense ratio higher than that.
5. Record of Fund House and Manager
It is also very important to check the records of the mutual fund scheme in which you are going to invest, the company that brought the scheme and the manager managing it. How long has the fund house been operating, how has its other schemes performed and how is the company’s reputation in the market. You will find all this information on the website of any mutual fund company, also known as Asset Management Company (AMC). There are many websites, where you can get information about the performance, rating, portfolio, etc. of any fund. Give some time and then start investing by choosing the fund according to your needs.
