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Indicators That Can Be Used To Identify The Best Mutual Funds To Invest In Sip

By Author: Jignesh Shah
Total Articles: 7

Based on the risk that factors associated with the mutual funds, it is very important for the investor to understand various signals that affect the standing of best mutual funds to invest in SIP. Even inventors can also take helps from fund managers to choose the best SIP plans. Basically every SIP plans are categorized in different category such as high-risk, moderate and low risk SIP plans. The risk factors are decided on the basis of the previous performance of the particular fund.

Signals for choosing best SIP or mutual funds:

The Sharpe Ratio And The Standard Deviation

This ratio is defined as per unit’s return over the risk taken by the scheme. A higher value of this ratio indicates that the returns are dependent on the value of the risk. The standard deviation is based on how the total return of the fund moves away from the average return. This deviation depends on the total risk of the fund. Hence, lower the value of the standard deviation is better for the value of the indicator.

The Relative Strength Index and Support and Resistance

The Relative Strength Index indicates the overall momentum that compares the recent gain magnitude and recent loss magnitude. This helps in analysing whether the fund has been oversold or overbought. If the RSI is above a value of 70, it means that it has been overbought. If the RSI is below 30, it indicates that the fund has been oversold.

A support level of a fund is formed when the value of the fund falls down and bounces back when the market improves. A resistance area is formed when the fund is not able to rise above a certain level. It means that the fund is much stronger than the past.

The Exit Load and Total Expense Ratio

The amount of money removed from a fund when the investment is redeemed before the stimulated time frame. If the exit load is high, it means that the fund’s strength in the market is diminishing. The total expense ratio means that the total number of expenses that has been charge against the scheme in a year.

The author is an economist and current he is working on his own research. Here he explains about the best mutual funds to invest in SIP.

Total Views: 29Word Count: 379See All articles From Author

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