Tips to pick a winning mutual fund


The chances are high that you might have made a decision to stick to mutual funds, but not aware on how to get the ball rolling. With a little bit of due diligence on your part things do become considerably easy. By having a clear cut view of your investment objectives along with risk tolerance levels you can figure out on how to start SIP.

The moment you choose a mutual fund there are various ways to analyse by observing the past performance of a fund, expense ratio and even the management team. Sometimes you might be guided by various investment choices that can outline your fund choices. You can diversify your portfolio by sticking to international exposure of funds.

Start off with your goals and levels of risk tolerance

Through a leverage plan you can pool in investments to be kept in the long run. If you are an investor there are plethoras of mutual funds from which you can exercise a choice, so this would enable you to narrow down your choices to a select few. Some of the questions that you need to ask as an investor are

  • Are you looking for short term gains or long term appreciation
  • Do you need the money on an immediate basis or something that is pretty far off
  • Do you want to adopt a conservative investment strategy

In the end you need to clearly think on the lines of the best horizons for your investment and what the time frame is where you are going to need the funds.

Expense ratio is important as it can break or make you?

To run a mutual fund it takes some money. There are various hidden areas where money has to be taken care off before it is invested. All these have a considerable say in the amount of profit that you end up making. The operating expenses and advisory fee is referred to as expense ratio. In a way it is the cost of owning a fund, Just think on the lines that a mutual fund has to make or break before it goes on to start earning money for you.

All things being equal ideally you would want your mutual funds to have the lowest expense ratio as far as possible.

Keep away from mutual funds that have a higher turnover ratio

Do pay a lot of attention on the turnover ratio which points to the percentage of fund that is brought and sold every year. This refers to any type of mutual fund that you are planning to consider. This does work out to be the bane of consulting. If you adopt a tax free option then this is not a point of consideration at all.

To sum it up in the disciplined age of today it is not that difficult to come across a reliable and a dedicated financial manager. Check out the track record of the manager and there is no worse feeling that opting for a manager with a poor track record.

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