You have heard a lot about a mutual fund for investment these days. I have also written a few articles related to Mutual funds and SIP. People preferred to invest in mutual funds either by investing a lump sum amount or by the SIP method. That happens because they see the return potential. But when you make your mind to invest then several questions came. What is the best mutual fund for investment? How can I choose the best mutual fund for Investment in India? There are a lot of mutual funds that are available which are given by Asset Management Companies. But by choosing the right fund can provide you to meet good returns and meet your goals.
In this article, “How to choose the best Mutual Fund for Investment” can give you an idea for selecting the right fund. Also, get to know about the different types of Mutual Funds & best mutual funds for investment available in India.
When you choose the right kind of Mutual Fund for Investment you open an opportunity to diversify your portfolio and use the concept of Rupee Cost Averaging.
By choosing the right fund you need to consider the following points:
The most promising factor to consider is the past performances. Whenever you choose a mutual fund you must check its past performances. Under past performance, please consider its return in 1 year, 3year, 5year, and 10years. Also, check its rank by companies with its peers in the same type. Check the past performances of the fund manager details or its fund management team.
If you are checking its performances for short term like 6-12 months only, then it will not provide you the good results. Although, people do not have time to check these details. That is why their return is not up to the mark. On the other hand, if you do some due diligence you will enjoy your return.
Mutual Fund Portfolio
While selecting a mutual fund one must check its portfolio. It is the internal part of the mutual fund. A portfolio tells you about what are the companies that pool together to make a mutual fund. It shows the top holding of funds that is invested in large-cap, medium cap, or small-cap companies. It also clarifies the percentage of its asset allocation & sector allocation. That also helps you to make your decision.
Risk and The long Term Goal
While choosing the fund, you must check the risk involved with it. Check whether the selected fund has more up and downs or have conservative movement. The extreme ups and downs can make and break your money. While in conservative there would be no gain or loss. Your money stays there where you start invested. Always remember, higher the risk involved high would be the return. But you must make your mind accordingly. You must consider the drastic changes in the value of mutual fund like happened in March and April 2020 due to COVID -19 impacts.
Also, you must know how long you want to invest. Whenever you invest you must know the money you invested is for the short term or long term. Always remember, the long term strategy for investment is beneficial. In the long term, the return potential is quite high & risk potential is comparatively down.
Risk and Return are directly proportional so, you must make a balance between them.
Fee and Charges
Whenever you start investing in a mutual fund or exit from the fund, there are some changes. These charges are taken by the Asset Management Companies. When you start an investment, they take their fee for starting your investment. Also, when you exit from the fund then companies take exit loads. But while exiting companies have some conditions.
SO, whenever you select your mutual fund for investment the fee & charges must be as minimum as possible. Otherwise, it will erode your returns.
Eye on Expense Ratio
DIFFERENT TYPES OF MUTUAL FUNDS FOR INVESTMENT
In India, there are several mutual funds for investment is available. But, how would you know which type of fund is suitable for you? There are different types of category of mutual funds:
Equity Mutual Fund
These types of funds are based on the public limited companies which are listed on the Stock Market. In India, most of the mutual funds are equity type. These kinds of mutual funds are more prone to volatility and the risk potential is also very high. But the returns have no measures.
Debt Mutual Funds are based on government bonds and corporate debt. These kinds of funds can give you a regular income. Debt funds are a bit safer than equity type mutual funds because they have less volatility exposure. The return potential is less than the equity fund. (Read Good Debt vs Bad Debt)
Balanced Mutual Funds
These funds are a combination of equity and debt mutual funds. There are 60:40 ratios between equity and debt funds. The risks involved in balanced funds are more than debt funds but less than equity funds. The return potential is better than debt fund & lesser than equity fund.
Money Market Mutual Fund
These funds are low-risk mutual funds for investment. These are collective funds of government securities, deposits certificates. The returns are also low in these types of funds.
Capital Protection & Fixed Maturity Type Funds
These are closed type mutual funds where there is a maturity period. One can invest during the initial launch only when the offer launch. Once the offer closed no one can invest further. The major drawback is whenever the big investor takes money out there would be a huge loss to retail investors.
BEST MUTUAL FUND FOR INVESTMENT IN INDIA
(Source: The Economic Times)
Below are some mutual funds in India for investment. Anyone can search for these funds and after satisfaction can invest and get good returns. (Please remember these are not picked by The True Investment. Please invest only after proper due diligence at your end).
If you want your money works thru mutual funds then you must search the right type of fund. The right type can give you the right direction to your Net Worth. Ultimately the selection of mutual fund either right or wrong linked to your Net Worth. The wrong selection can break your Net worth and the Right selection can make your net worth.
The proper due diligence in selecting the mutual fund seems like a daunting task. But you can increase your chances of success in your life.