Ways to Choose Mutual Fund Schemes

 

Where can I find mutual funds to invest in?

You can turn to any of these for updates on mutual fund schemes that are open for investments.

• Advertisements in leading newspapers
• Websites of mutual fund companies
• Agents and distributors of mutual funds
• Banks and post offices that function as distributors of mutual funds

Remember that banks and post offices are not responsible for the performance of the funds they distribute and it is always advisable to track performance of funds before investing rather than relying on agents and distributors who give you gifts or incentives to invest in a particular fund.

 

How to select a mutual fund scheme to invest in?

 

To decide which scheme you should invest in, understand your investment goals and match them to the objectives and expected returns and previous performance track record of the mutual fund scheme you are considering. Begin by answering these simple questions for yourself and then reaching out to a financial expert for guidance.

• What is your age?
• How much money can you invest?
• For how long can you invest the money?
• How often do you need the returns?
• How much risk can you handle?
• Will you need money in the recent future?
• Do you need to save tax?

Read the offer document carefully, track the past performance of the scheme, compare it with others in its category and evaluate the quality of the securities that the scheme is planning to invest in.

 

How do I decide what the proportion of my debt and equity investments should be like?

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Your risk-taking capacity, age, financial position, income and liabilities will determine the ideal debt and equity investment proportion for you. You can assess these using different tools and calculators as well as get a financial advisor to guide you. Many times, your mutual fund agents and distributors could help you out as they are more aware and clued in to fund and market performances.

 

How should I begin my mutual funds investment process?

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What are the things I should check for before investing in a particular fund of my choice?

• As a start, read the objective of the fund and see that is matches your investment goals.
• Then check your scheme document for details on how the investment is being planned, on what basis are the securities being decided and what the overall logic and thought process behind the fund’s investment strategy is.
• Once you are convinced of the strategy, track the past returns of the fund to see how the strategy has worked and how the fund has performed in different market situations. While this does not guarantee future performance, it gives you a fair estimate.
• Mutual funds are not without risks, and fund managers will often diversify their portfolio to minimise risks and maximise returns. Read the scheme information document for information on risks.
• Diversify your investment portfolio and don’t invest all your money in a single fund.
• When choosing different funds to invest in, allocate your money in growth as well as income schemes, based on your age, income and risk handling ability.

​If different mutual funds have schemes in the same category, is it a better decision to opt for the scheme which has a lower NAV?

While determining which scheme to invest in, the NAVs and the resulting number of units available for a certain price are irrelevant to the decision. Always opt for a scheme which is professionally managed and belongs to a mutual fund whose schemes have performed well in the past. Number of units that you will be able to buy should not be a consideration factor because it is possible that two schemes with the same rates of return will offer you the same amount of returns even if the number of units purchased is different. Remember that if a new scheme offers units at a price of Rs. 10 and an existing one offers units at Rs. 90, your decision to invest should still be based on the professional management of the fund and the experience and qualifications of the fund managers.

 

How do I ensure that a company, whose name seems like that of a mutual fund company, is actually a mutual fund company?

Mutual fund companies can mobilise funds from investors only after they register with SEBI. If the companies do not come under the purview of SEBI, they are not legitimate mutual fund companies.

 

If the net worth of my mutual fund scheme sponsor is high, does it guarantee me better returns?

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The net worth of a sponsor for a period of three years is mentioned in the offer document only to give investors an idea of the track record of the company sponsoring the fund. In no way does it guarantee higher returns or imply that the sponsor will compensate in case the NAV of the scheme falls.

 

As a Non-Resident Indian (NRI), can I still invest in mutual funds in India?

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Yes. You can. All details about the regulations and procedures for NRI investments in a particular scheme are available in the offer document of that mutual fund scheme.