Mutual funds are a good place to park your money. In India, there are more than 40 AMCs offering more than 1000 schemes. Increased number of schemes has led also to an increased dilemma in the mind of investors. Investors often get confused when it comes to selecting the right fund from the plethora of funds available. Many investors also feel that 'any' scheme can help them achieve their desired goals. But the fact is, not all schemes are same. There are various aspects within a scheme that an investor must carefully consider before short-listing it for making investments.
Firstly, know your own needs. Are you investing to fulfill a short-term or a long-term goal? Or, are you investing just because you heard in your office cafeteria that you should invest in a certain fund? Not all fund scheme serve the same purpose, so you should know why you are investing.
Another aspect while selecting a fund scheme for your investment is time horizon for your investments. What period are you ready to invest in market or how long you don't need your invested money. Your time horizon should be held for at least 3 - 5 years, because your fund investments are meant for longer period of time. However if you are looking for a shorter period of time you can opt for investing in debt investments.
You should also consider the philosophy of scheme while investing in it. Does the fund house follow a value philosophy, or do they follow a growth philosophy? All fund houses cannot be good in following all philosophies. Normally they would tend to be good in one or the other. Once you agree with the philosophy of mutual fund then only you should opt for investing in mutual fund.
Track record and past performance of schemes plays an important role in selection of a fund. There are many new funds and many of these mutual funds will not be as successful as the others which are existing in the market from last many years. You should invest in mutual funds that already have a successful track record that they have built over the past 5-10 years. Past performance of scheme also play an important role in selecting a mutual fund. However you should not rely much on past performance of fund, as many investors look at past performance and assume that the scheme will continue to return the same in the future. Past performance is not always true and can often be wrong. Any fund can do well over a short-term because luck and other factors can come into play. So, do not choose a scheme to invest in just because it has done well in the recent past. You should be interested in the long term performance of the scheme.
Selecting a Good Mutual Fund for your investment plays an important role for your investment, if you are looking to invest in Mutual Funds. Click here to download Free E book on How to select a Mutual Fund?
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