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What Are Mutual Funds? 5 Ways To Choose The Best Performing Mutual Fund In India

By Author: Swarali Chavan
Total Articles: 37

Mutual funds concept is not new in India. However, in the past decade or so it has gained tremendous popularity. Mutual funds aid people to manage their wealth better. It is a successful investment vehicle. Mutual funds assemble money from a group of people. The fund house then invests them in securities. Various mutual funds depend on the investment objective of the investors. They are broadly classified as equity funds, debt funds, diversified funds, money market funds, sector-specific funds, index funds, tax planning funds, large, mid or small-cap funds. Some funds also depend on the closure and can be open-ended or close-ended schemes.

How does mutual fund work?

Mutual fund investments are made in two ways – lumpsum or through Systematic Investment Plan (SIP). Lumpsum is where you invest all your money in one go and SIPs follow investment at regular intervals. These intervals could be daily, weekly, monthly, quarterly, half-yearly, or yearly basis. Today you can invest in mutual fund app as well.

Choosing the right mutual fund scheme is a tedious task, but with the help of a financial goal planner, it is possible to select the one that meets your requirements. You will have to follow the mentioned steps:

• Mention the goal. It could be to build wealth, child’s education, wedding, travel, purchase a car, vacation, own a house, buy electronics, and so on
• Provide a summary of your goal, i.e. the target date and desired amount
• You will receive the details of the right investment scheme

Yet, from the list of plans, how to make the appropriate choice?

1) Strong fund house: Before you narrow down on the mutual fund scheme, go for a firm that holds substantial goodwill in the market. They should have a decent presence and a promising, as well as, proven track record. A right fund house offers efficient handling and management of your hard-earned money. This ensures you receive positive returns for a longer period.

2) Consistency: Once you have selected a fund house, go for a scheme that has offered consistent performance for longer tenures like 4 to 10 years, than shorter terms. This way it becomes easier for you to make a choice that beats the benchmark indices and can also compare them to the competitors.

3) Risks and returns: Investments in assets or securities involves some level of risks. If the returns are not in proportion with uncertainty, then it is not worth opting for such investments. An ideal mutual fund is the one that offers higher profits for the equivalent risk taken. Only if there is a balance between these factors, can you maximise your returns, despite the calculated risks. Hence, analyse your risk tolerance level. A mutual fund app today gives you a clear picture of the same.

4) Goal-related investment: The objective of every investor is to ensure that their savings enables them to achieve their goals. Investment and purpose should be aligned. This is dependent on the type of mutual fund. If it is a short-term goal, go for debt funds. If it is a mid-term one, choose balanced mutual funds. Lengthy tenure investments mean equity funds.

5) Charges: Every mutual fund house charge a fee for the services they offer. They are divided into exit load and expense ratio. These factors decide the net return on investment.
If you want to make lumpsum investment opt for the mutual fund apps, else go for the SIP app who also offer similar facilities.

Author bio:
Swarali Chavan is a finance professor who loves study about market investment instruments. She has written on mutual fund app. Through this article, she has listed ways to choose the best performing mutual funds

Total Views: 21Word Count: 610See All articles From Author

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