Tips you should consider while selecting equity mutual funds

Choosing a proper mutual fund scheme can be very challenging and confusing. Most of the time it becomes really difficult to select one scheme as per the risk appetite as there are a plethora of options available when it comes to mutual fund schemes. Each mutual fund investment is linked to some risk of different perspectives like returns, market volatility, inflation, change in the rate of interest, rating and review etc.

So before you select a mutual fund scheme for yourself, consult with an expert of this realm. They will determine your financial goals, your plans regarding investment and the amount of risk you can afford. This way they will demarcate the number of investments you require. So here are a few tips which may help you to select the right equity mutual fund in India for yourself:-

  • Investment Objective: Before you finalise upon a particular scheme, identify the objectives of your investment. The purpose of the investment varies from one person to another- it may be buying a home or ensuring a steady income post retirement. Every mutual fund plan has certain objectives which reflect its theme and the strategy regarding asset allocation. Check those objectives that will be really helpful to find out that plan which will fit well with your financial goal.
  • Past performance: To determine whether the fund is consistent in market condition or not, you must compare its performances in the must with the peer funds and benchmark indices. Otherwise simply comparing its past performance in the recent past won’t work actually. Compare the performance of the last three, five or ten years’ periods. It will give you a more holistic knowledge about the fund.
  • Ratio of Expense:-If you divide the total expenditures with the total outstanding units, you will get the mutual funds per unit cost and that is the expense ratio. The investor has to bear the expenses of the fund so if the ratio is of lower expense, it means, the fund will be left with more money for future compounding and evidently, there will be higher growth. So you must be aware of the charges of the investment and commission.
  • Fund house reputation: You should search well and go for that fund house which is recommended by your close ones or which you know well beforehand or if that house has a strong base of investment in the market of mutual funds. A sign of a good fund house will always keep their focus on building efficient teams for fund management and strong processes.
  • Liquidation: Emergency does not come with prior notice and then the need for money becomes the only necessity. So while selecting a fund makes sure the fund can be liquidated to cash easily without any hassle at the time of emergency. So go through the terms and conditions regarding liquidation thoroughly.

Selecting a mutual fund is not an easy task; after all, you are investing the money you have earned after working hard. So take this decision carefully.

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