Mutual funds are destined to make things easier in the tasking of investing, but choosing the right one can itself scare many. Here’s a basic coverage to help you. So with a lot of categories of mutual funds, fund houses, and schemes available choosing the right how to invest mutual fund is not an easy task for many investors. So the best way to begin is to choose a method to narrow down on the right fund for you. Rarely investors who do something else for a living employ a regular checklist to calculate a fund they are thinking to buy.
So these five ways can help you to decide whether a particular fund is a good investment –
- Risk: There always risk in investing. The true measure of risk is whether a fund is capable to give you the kind of returns that rationalize the risk it is taking on. It is not as easy to measure as returns. There is an inclusive variety of statistical techniques that can be used to measure this. We refine a combination of performance and risk measurement into the Value Research Fund Rating. When we say that a fund has a five- or four-star rating, it means that the fund has been compared to alike funds, performed better, given its risk level.
- Performance: Performance links must be used only to relate the same type of fund because then they are meaningless otherwise. Simply when used within the same type of funds do performance numbers tell you anything at all. By the time you reach the stage when you are relating performance numbers of different funds, you should already have a good idea of how much you will invest in that set
- Management: Fund management is honestly creative and personality-oriented activity. This may not be right of some types of funds like shorter-term fixed-income funds and of course index funds, but impartiality investment is more of an art than a science. When you are buying a fund because you like its track record (and unless you can predict the future, that’s the only way to buy a fund), what you are in fact buying is a fund manager’s (or sometimes a fund management team’s) track record. What you want to make assured is that the fund manager who was responsible for the part of the fund’s track record that you are buying into is still there. A high-performance equity fund with a new manager is also like a new fund.
- Cost: However the above are the most important points on which to calculate the right fund, there is one more factor that is becoming more and more significant, and that is cost. Funds are not for free, nor are they run at an equal cost. However the difference in different funds’ cost is not large, these can composite to significant variations, particularly for fixed income funds where the performance differential between funds is quite small, to begin with. If an AMC requests higher returns from its business, then it must defend it by giving you higher returns on your investments.