How To Find The Best Performing Mutual Funds In India

By Author: Vamsi Krishna
Total Articles: 27
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Identifying a mutual fund is just like finding out the best stocks to invest in – you must be very careful with the choice instead of going with the ‘hot’ fund of the day or week, or ones that have nothing else but a short term past performance to show for.

There are some simple rules you must follow to identify the best performing mutual funds in India. Here are three of them:

1. Look for long term players: Typically in a bull market, there are a lot of new schemes launched by mutual fund companies. Most of these schemes are nothing but an offshoot of existing schemes, and thus have nothing new to offer to investors.

These are however launched with a view to get more assets under management for the mutual fund companies.

For you, as an investor, it pays to look only at schemes that have been operation for a long time, say around 10 years. This will leave you with only those schemes that have seen through a few market cycles, and thus have proven their ability to earn returns for investors.

Simply avoid the schemes that have done well in the short-term, because their returns are exactly ...
... that – short-term.

2. Look for low cost funds: Mutual funds don’t come for free. Fund houses charge investors what is known as fund management fee, which is mandated to be a maximum of 2.5% for equity funds (2.25% for debt schemes).

Look for funds that charge a low management fee, because each rupee saved can add a lot to your returns over the long term. Of course, cheapness alone doesn't guarantee success – but low cost is one of the necessary conditions for long-term success.

3. Look for best-performing managers: Your money is not managed by mutual fund companies, but by the fund managers employed by these companies. And fund managers are people like us, who have their own investment rules and discipline to follow.

It is thus important that you choose fund where the fund manager had delivered good returns over the past 8-10 years. This will help you ensure that the manager has been on the job in both bull markets and bear markets.

Also look whether a fund manager has been with a specific fund for long (10 years) or not. While there’s no data to back the claim for a ‘long-serving’ fund manager in India, research done by Standard & Poor’s in the US has proved that a fund manager’s tenure with a specific fund is one of the most important reasons for its success. But this factor is often overlooked by investors rushing to buy funds with the highest short-term returns.

Conclusion

Like your must do a careful research to find out the best stocks for your portfolio, you must also do a due diligence when it comes to finding out the best mutual funds for long term investment.

While it is difficult to know how your chosen fund will perform in the future, you will at lese be able to sleep peacefully at night knowing that you have done the hard work to pick the safest and the best fund.

Author Bio

Ritish Kumar is a finance enthusiast and a keen observer of the Indian share market. In this series of articles, he talks about investing in stock market and staying profitable. mutual fund, mutual fund companies, best mutual funds