Since the last few years, Mutual funds are the center of attraction for all investors in India. The situation is such that financial planning without mutual funds seems impossible for many. But, is it true and if yes how to go about it.
'Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing'Have you ever asked this question to yourself? Why this line is mandatorily disclosed with every Mutual Fund ads and product documents?
Simple answer: Everyone in the Financial World will advise you based on past data and future probability. The market is dynamic and changes on a daily basis all investments are subjected to risk. Offer documents help Mutual Funds to pass liabilities on you as now you’ll be responsible for your decisions.
Today we will understand, how to select the best fund for your investment. You might be Surprised why we are discussing this topic first! Don't be, the next post might completely change your view on Mutual Funds completely. Stay Subscribed.
Best Mutual Fund selection process:
Financial Plan - Your financial plan must be very clear. This includes the amount to invest, tenure, realization gains expected or maturity amount.
Risk Appetite - It is very important to understand taking an unusual risk for higher returns is not required. You can check my previous posts for more details.
Selection of right fund category - There are multiple types of fund categories: ELSS, Equity, Debt, Sectoral funds, Thematic funds, Liquid Funds, etc. This depends mainly on three factors tenure, amount to be invested and method of investing.
Method of Investing - Investing through Lumpsum and SIP has a huge significance on investment and selection of funds.
Once the above basic parameters are in place, you now need to filter funds based on three basic criteria.
Simple answer: Everyone in the Financial World will advise you based on past data and future probability. The market is dynamic and changes on a daily basis all investments are subjected to risk. Offer documents help Mutual Funds to pass liabilities on you as now you’ll be responsible for your decisions.
Today we will understand, how to select the best fund for your investment. You might be Surprised why we are discussing this topic first! Don't be, the next post might completely change your view on Mutual Funds completely. Stay Subscribed.
Best Mutual Fund selection process:
Financial Plan - Your financial plan must be very clear. This includes the amount to invest, tenure, realization gains expected or maturity amount.
Risk Appetite - It is very important to understand taking an unusual risk for higher returns is not required. You can check my previous posts for more details.
Selection of right fund category - There are multiple types of fund categories: ELSS, Equity, Debt, Sectoral funds, Thematic funds, Liquid Funds, etc. This depends mainly on three factors tenure, amount to be invested and method of investing.
Method of Investing - Investing through Lumpsum and SIP has a huge significance on investment and selection of funds.
Once the above basic parameters are in place, you now need to filter funds based on three basic criteria.
Standard Deviation - Always try to find funds that have a standard deviation in line with Nifty funds or nearby by them. Standard deviation measures the volatility the fund's returns in relation to its average.
Beta - Prefer funds with Beta of 1 or below. A beta of less than 1.0 indicates that the investment will be less volatile than the market.
Alpha - Higher the better. Alpha is a measure of an investment's performance on a risk-adjusted basis.
Fund Manager & Fees are other important criteria. They are not included in the above list as it depends on the fund category you want to invest.
Beta - Prefer funds with Beta of 1 or below. A beta of less than 1.0 indicates that the investment will be less volatile than the market.
Alpha - Higher the better. Alpha is a measure of an investment's performance on a risk-adjusted basis.
Fund Manager & Fees are other important criteria. They are not included in the above list as it depends on the fund category you want to invest.
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