Mutual funds are considered one of the most preferred investment options as they offer attractive returns and a diversified portfolio. However, one should remember that each of the many available schemes has its advantages and disadvantages, which one should be aware of as each scheme is different and unsuitable for every investor. One should choose a mutual fund scheme according to his investment objective and risk appetite, among other factors.
Many schemes are available in the market, but one should choose the best mutual funds to invest widely after thoroughly studying the markets. Here are some factors investors should consider while considering the best mutual funds that would give them the desired results.
1.Investment Objective & Time Horizon
This refers to an investor’s financial goal, which they want to accomplish with their investment. The investment objective can be short-term or long-term, for buying a property or a vehicle or even children’s marriage, retirement etc. On the other hand, time horizon refers to when the investor wants to park his money in a mutual fund scheme. It can be for a short period of one day or as long as five years. Different fund categories work best for different time horizons.
2. Performance Against Category
Another factor that plays an important role in assessing a mutual fund scheme is its performance compared to its similar category. This helps in getting an overview of the fund’s performance. However, the comparison should be made only among similar mutual fund schemes, as a small-cap mutual fund should be compared with other small-cap funds and not against other mid-cap or large-cap funds.
3. Past Performance
The best mutual funds can generate better than benchmark returns over time. Choosing funds that have consistent results over volatile market conditions can give stable results even in the future.
4.Fund Manager’s Track Record
Selecting a mutual fund with a good fund manager backing it is extremely important. One should look at the fund manager’s records and experience and the performance of funds managed by him/her to date before choosing the right mutual fund.
