Investing Money On Mutual Funds But Which are Good For You, Selecting right and good mutual funds nowadays has become pretty tough it is like a cricket match which is hard to win. If you go to the calculations there are total 190 fund houses which has around 7147 Mutual funds schemes only for Indian investors.
This numbers make mutual fund selection task more difficult. In mutual funds market risk is also involved hence one has to be more careful while selecting mutual funds.
Investing Money On Mutual Funds But Which are Good For You
So you must have following information before investing in mutual funds.
Financial Goal for Investment:
- Capital Appreciation
- Tax Saving
- Child Education
- Retirement planning
Fund selection without having an investment goal is useless and you should know the reason of investing in mutual funds.
Apart from investing purpose you should also know that how long you have toinvest in mutual fund & at what stage you should sell. Hence, your investment can be short term (1 to 2 years) or Long term investment (5 to 10 years).
Here are some factors which you need to know for selecting good mutual funds:
Investment Objective of Fund:
This will explain the scope of investment. Whether the fund is equity or debt oriented, whether the fund will be multi-cap, large cap, mid- or small-cap specific, the level of diversification. You must check that your investment objective is matching or not, this also depend on your risk taking capability if you are worried about capital protection then you can opt for debt fund or else you may think of large cap or multi-cap funds.
Type of Fund:
One of the important thing which you must check is type of funds, check whether the fund is open ended or close ended? You can sell open ended fund any time while close-end fund has lock-in period you cannot sell till lock-in period is over. If you are planning to invest inshort term then you should not select close ended funds. Another thing you must check is fund is growth fund or dividend. Dividend funds provides you dividend at every year from profit usually dividend fund NAV is lower compare to Growth funds.
You have toenquire about the fund manager who is managing the fund and for further moving you have to do the analysis about qualification and past experience of fund manager. Ultimately fund manager makes fund healthy. Most of fund related information will be available in offer document or fact sheet.
Asset Allocation / Stock Holding:
One should know asset allocation details and stock holding in various sectors. It is one of the most important factor as return on which your total investmentdepends on where your money is invested.It also cause the classification of fund in to small cap, mid cap, multi cap, large cap, blue chip, debt fund etc. If you are seeking some regular income and you have a low risk profile then you must select debt fund and if you have aggressive profile then you may go for multi cap or small cap, mid-cap funds. Ones who are looking for stability in profile may go for large cap funds.
Investment Method :
The minimum initial investment which is required, methods of purchasing, redeeming and making additional investments, the time taken for redemption, so forth and so on.If you want stability in your profile and want to divide risk then you should consider SIP plan instead of one time investment.
Fees, expenses and loads are other big items to look out for. Most of the funds in the market charges entry load or exit load then you should consider this cost also before making investment.