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People who are new to mutual fund investment are often confused about choosing a good mutual fund and many times due to this confusion, they end up investing in bad schemes eventually causing loss of investment.So let’s have a look at a checklist which you can follow to avoid such mistakes.
Check Fund House The first and foremost thing that you should check while investing in a mutual fund scheme is the fund house that the scheme belongs to. Investing with a big fund house not only increases the chance of success, but it also gives investor a sense of security.
Check Category The second thing that you should check is the category of the fund and the sectors it has invested in. After checking these 2 parameters, do a bit research on how other mutual funds that fall in same category are performing and also have a check on the performance of sectors in which the fund has invested. Knowing these two things will give you a basic idea about how the fund can behave in future.
Check Assets Size AUM or Assets under management is a measure for calculating the total amount of assets that the fund is managing at that time. Check that how close the fund is to the average asset size in that particular category and you can get a basic idea about how the investors are reacting to the scheme.
Check Expense Ratio Total expense ratio is among the most important parameter that shouldn’t be overlooked while choosing a mutual fund. Expense ratio is basically the cost that is required to manage a fund and this expense ratio is deducted every year from your investment. So, check that the fund you are choosing has an expense ratio similar to other funds in same category.
Check Lock-in Period Lock-in period is the minimum time period for which you have to remain invested in a mutual fund scheme. Many a time new investors forget to check this lock-in period and realize at a later stage when an extra amount is charged in the form of exit load during redemption of the scheme. So, avoid such kind of negligence.
Risk Factor It is a parameter which show us the risk associated with that particular fund. A mutual fund scheme has several risk measures which lead a fund to range from low to very high. Equity funds have generally high risk factor as compared to debt funds which have the lowest risk factor. So, choose a fund according to your risk appetite to avoid confusion and panic in future.
These were the basic parameters that an investor should check for every time he is making investment into a new scheme. We, at MySIPonline, have data of thousands of mutual fund schemes which include all such parameters. You can also compare among various schemes to have a better understanding of how these parameters can affect the performance of a fund. So, do your own research before investing into any scheme and only invest when you are totally satisfied as this is your money and only you are responsible for it.