How Do You Choose The Right Mutual Fund Scheme?

Mutual fund investments are constantly in the talks these days because of the diverse benefits and investment opportunities that they offer. But skimming through thousands of options and feeling assured about what is the best amongst the rest could be overwhelming. A prospective mutual fund investor must analyze and understand his goals and vision clearly before investing. 

Here are a few tips one can abide by before investing in mutual funds.

1. Understanding The Goals and Risk Tolerance

Before you start investing it is very important to understand the nature of your goals and vision. Whether you are looking forward to long-term capital gains or regular income or trying to achieve goals like child education, marriage, etc. Having clarity of your purpose will enable you to build a portfolio that suits your needs.

 Another important factor that one cannot miss is analyzing the risk appetite of the prospective investor. The risk tolerance lets you decide whether you are ready to accept dynamic changes in the portfolio value or are looking forward to stable returns. Here we need to keep in mind that risk and returns are directly proportional and hence depending upon the goals you must choose the type of investment wisely. 

Understanding and analyzing your investment goals and current risk appetite can be overwhelming at times and this is when you can approach financial investment distribution to help you out. 

 

2. Identifying the Style and Fund Type

The primary objective of growth funds is capital appreciation. After you have clearly identified your goals and vision the next step is to identify the type of fund investment that suits your needs. Suppose you wish to invest for a long-term need and have the financial readiness for a fair amount of volatility and risk, then a long-term capital appreciation fund-like mutual funds equity funds are definitely a good choice. Here, after the identification of the fund, we need to understand that long-term investments hold a high percentage of their assets in common stocks and hence they are considered risky in nature. At the same time offer better returns in the long run. But if you are looking forward to a regular source of income, an income fund scheme may be a better choice. Government and corporate bonds are the most common types of income funds. Bonds, though being less volatile, are still risky in nature. 

Because of such reasons, a financial distributor always recommends a balanced portfolio.

 

3. Evaluating Past Performance and Management

A very essential part of the investment process is reviewing a fund’s investment literature and evaluating the past results. The past performance of a fund gives a clear picture of how the fund managers deliver results with respect to consistent market performance. Also, gives a clear picture of the historical trend of the fund which lets you decide whether you should invest or not. The fund literature gives you an idea about the holdings and prospects of the fund in the future. Both of the factors play an important role in deciding if the fund is investment-worthy. But the evaluation process needs a lot of research and analysis which can be intimidating for a layman. For such purposes, you can approach a financial investment distributor to make a wise investment decision.

 

4. Understanding Fees and Loads

The mutual fund industry makes money by charging fees to the investor. It is important to understand the different types of charges associated with an investment before you invest.

Some of them charge a sales fee known as a load which is either charged at the time of purchase or upon the sale of the investment. There are two types of loads: Entry Loads & Exit Loads. Reach out to a financial investment consultant to understand such intermittent fees and loads to make a wise investment decision that proves to be fruitful to you in the years to come. 

 

In a nutshell, the mutual fund industry is vast and overwhelming but also promising. It is always recommended to consult a financial distributor before making any investment decision than regret later. A portfolio becomes a strong one when all the factors are checked and investments are balanced throughout. At Khasnis Prime Wealth, we leverage our years of experience to curate a strong portfolio that taps the market performance at all times and ensures the best returns out of your investments.