Mutual Fund is a professionally managed investment fund which pools money from many investors and invest broadly in equity, debt., combination of equity & debt (balanced or hybrid fund) and commodities.
How to choose the type of Mutual Fund
The objective of investment should be clear while choosing mutual fund. If the objective is to make –
1. Long term investment– If you are planing for retirement or would not need this money in foreseeable future and can take little bit of risk then an equity or balanced fund would be a good option.
2. Short term investment– if you want to keep aside your money for a couple of months, you may choose liquid fund.
3. Regular Income– Income fund or a monthly income plan would be a good choice.
How you may select the Mutual Fund
After deciding the objective of investment and type of mutual fund, at least below factors should be checked and evaluated before choosing the fund.
1. Historical Performance Data – It will help to access the performance of the fund across different market cycle and how efficiently the fund is being managed by the fund manager.
2. Rate of Return – Compare the return with peers and other similar investment options available at that time.
3. Expense Ratio – It is fund management charges and all other charges/cost related to that of fund management.
4. Portfolio Holdings – The fund needs to invest in good quality of stocks which should have lower PE ratio and fund is invested as per its investment objective.
Last but not the least, mutual mund investments are subject to market risks, read all scheme related documents carefully.
Quite Informative ✌️