How to choose a mutual fund?

Direct mutual fund

Whenever an investor wants to invest his money, he always looks for a better direct mutual fund where he can get easy returns and easy to invest. There are so many websites which will project themselves as the best one.  But it always the investor who has to decide what is right for him. There are so many things; the investors have to look upon. The investment still needs a smart decision, and it requires proper research and analysis of the risk.  So before choosing any mutual fund, have a small look on these points:

Properly defined goals 

Goals are very much crucial while choosing the mutual fund or for anything that you want to do in your life 4 Goals make us more apparent and more particular. So, the investor should always decide whether the investment is for short term or the long term.  For example, if mutual fund investor will likely to buy a new car, a home or for education or a new device. So, he must have to decide what type of investment he wants to do. For retirement, child educations, for marriage or vacation are all comes in long term mutual funds investment.

Choose a category for mutual funds 

The mutual fund comes in various shapes and sizes according to the plans for the investment. An investor decides what type of mutual funds investment he wants to invest in, according to their predefined goals.  The longer the investment is, the higher is the risk. There are various categories of mutual funds investment. Below is the list of types of mutual fund investment and their expected returns.

Types of mutual funds in India 
Fund TypeIdeal DurationExpected Returns
Short term funds 1-3 years8-10%
Income funds1-3 years8-10%
Death oriented balanced fund2-3 years7.5-12%
Equity oriented balanced fund2 – 3 years10-15%
E l s s funds3 years(minimum) 15-20%
Large cap funds4 + years12-18%
Mid Cap funds6 + years15-20%
Small cap funds7+ years15-20%
Multi cap funds1 years Plus15-20%
Sector funds7 + yearsVariable 

Methods of investing 

When an investor chooses his type of mutual funds, then he looks upon various methods to invest.  There are two methods through which an investor invests. 

Lump-sum 

In this type of method of investment, the investor has to pay the single amount in one go. In this, the investor invests for one time for an indefinite period. 

Systematic Investment Plan – In SIP, the investor has to pay the fixed money of the investment every month for a particular period.  Once an investor starts the biller,the amount will get deducted. 

Choosing a type of mutual fund investment

After the selection of the method of direct mutual fund investment, an investor has to select the type of mutual funds for investing.  An investor has to check the first type of mutual funds to be on the safest side.

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