About 2430 Schemes in India - How to Pick the Right Mutual Fund?

About 2430 Schemes in India -  How to Pick the Right Mutual Fund?

Data from Association of Mutual Funds in India (AMFI) for June  2016, shows there are 2,428 mutual fund schemes now. 

For first-time investors, it is important they choose the right scheme, to ensure their investments are on track:

1. How should an investor select a scheme to invest in?


Investors should choose a mutual fund scheme keeping their risk taking ability, time horizon and goals in mind.

They could get an asset allocation plan for themselves which specifies what percentage they could allocate across asset classes like equities, debt and gold. 
Typically if they wish to invest for one day to less than three years they could go with debt oriented funds or/  arbitrage funds. 

For three to five years they could consider hybrid funds which are a mix of debt and equity. If  their goal is 5 to 7 years away , then they can consider higher risk products like equity oriented mutual funds.

2. There are 43 fund houses which offer mutual funds. How do I choose amongst them?


 It is important to choose a fund house carefully as when you invest you are entrusting the fund house to manage your money .

Wealth managers suggest investors consider the pedigree of the fund house before choosing one. 

Decisions taken by the fund house and its fund manager could have a significant impact on the investment performance of the scheme. Hence check the history of the fund house, its management track record, performance of its fund managers before zeroing down on a scheme.

3. Is past performance of a scheme important? How can an investor access it?

While past performance of a mutual fund scheme is not indicative of future performance or returns, distributors suggest investors should look at long-term performance of periods of 3, 5 and 10 years of schemes. 

They can choose funds that have consistently beaten their benchmark in that tenure. 

A scheme which beats its benchmark indicates good fund management and efficient processes of the fund house. Investors can visit third party websites like Value Research or /  morning star, or /  ask for comparative data on schemes from their distributors. 

Src: ET, Prashant Mahesh


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