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Risk and reward always go hand in hand. So, if you invest in a sectoral fund and have a low-risk appetite, you might like to reconsider it.
Everyone wants to invest in the best mutual fund, but it becomes a challenge for an investor to find a mutual fund that will give a good return as it varies from one investor to other depending on various factors.
In order to find the best mutual funds, you need to first segregate the funds depending on your risk profile, investment objective, and duration. Now make a list of funds that you think would be the best fit according to the applied filters.
Here are five things to consider to find the mutual fund that works for you:
1. Performance of the mutual fund: Select a fund that beats the benchmark index in the category and a fund that outperforms peers over a consistent period. The best way to find out the performance of a fund is to check the quarterly ranking released by various AMCs and mutual fund research organizations. Past performance is not a clear solution, but it surely gives you an idea to come to a decision.
2. Risk & return ratio analysis: You should choose a mutual fund that is capable of giving returns according to its risk profile. There should be a proper balance between risk and return. A fund is considered good if it performs consistently well with low risk.
3. Total Expense Ratio (TER): It is one of the important parameters to be checked while shortlisting any mutual fund scheme as it indicates the cost of investing in that particular mutual fund. The higher the expense ratio, the more it would affect the fund’s returns. TER comprises brokerage fees and other costs that fund houses charge from investors.
4. Experience of fund manager: The mutual fund schemes are managed by fund managers. Their experience and viewpoint play an important role in generating returns. Hence you should always check who is the fund manager of the scheme you have selected how has been his past track record as the performance of the fund is broadly impacted by his tenure and expertise.
5. Size of the AUM for the Fund: It is important to check the size of the Assets under Management(AUM) as in difficult times larger funds with bigger AUMs remain stable as compared to smaller ones. The asset size of an MF is different for debt and equity schemes.