Investing in mutual fund can be tricky with a wide variety of choices on offer with different investment objective. It is often difficult for the investor to choose a fund that would be most appropriate for the financial goals.
In case you are less adept at investing, it is best to seek some expert advice in selecting a fund. However, should you choose to invest yourself, there are some basics investment norms that one should follow to be on the safe side.
While choosing a mutual fund, first and foremost you should assess whether your goals are in sync with the goal that the fund seeks to achieve. You should consider the relative performance of the funds and choose the one that has provided consistent and high returns.
It is performance that matters most. Remember unit available at lower NAV or the one coming out with a fresh public offer at face value might not be the best choice. It is the absolute return that you get that counts. Therefore, a better performing existing fund with higher NAV may be a better choice though you will be allotted lesser number of units against the same amount of investment.
You should also know the expertise and track record of the fund manager. Also read the offer document to understand the fund manager’s strategy and see whether you are comfortable it.
You should also look at the percentage of expenses of the fund and matching them with similar offerings since this has a bearing on the overall returns.
Here are some dos and donts while choosing a mutual fund:
Identify your goal and invest accordingly
Be aware of the loads and charges
Invest as per your objective and risk-appetite
Keep track of NAV of scheme on a regular basis
Update yourself on the performance of the scheme
Do not invest on basis of incentives given by anyone
Do not rely solely on past performance
Do not get carried away by name of the scheme
Do not listen to promise of unrealistic returns
Do not deal with unregistered agents/brokerages