How do you choose the best performing Mutual fund?

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best performing mutual fundsWe all want to save and invest today for a better tomorrow but before we even start thinking of making an investment, we are stuck behind thinking about the kinds of instruments to invest in and which would give you the best returns of them all. Investing in a mutual fund seems to be one of the best sought out ideas today and that is because of the kind of transparency and the return on investment seen. If you were to invest today in the equity market, you would have to look at quite a lot of factors before you can even think of starting off. It is a lot easier with the mutual fund market because you are not looking at each company as a standalone investment – you are in fact looking at them as a category altogether that is a part of the portfolio.

So, if you had to decide upon a mutual fund today – how would you be able to decide the best performing mutual fund and if it would suit your appetite. There are bound to be many to choose from and picking the right fund would be absolutely key here. So, how would you go about it? How would you understand what metrics to look at and which to ignore? Moreover, what should you look at to get a great bit of insight?

Here are a few ideas to help you decide better and quicker -

Look at the portfolio:

A quick look at the kind of companies that are being invested in will help you get a tone of the investment categories. You would be able to understand the appetite the financial planner has and if it matches what you would have in mind. The portfolio could be as varied as can be but the idea to match is the kind of companies that are listed and if you see a good growth pattern over the tenure.

What is the performance ranking?

It is the simplest way to rank funds amongst peers and understand how they should be judged. It would give you the quarter ranking and also the way it has performed quarter on quarter in its peer group. It makes sense to choose a fund that has been in the top chart and has been performing in the past few quarters.

What is the total expense ratio?

This becomes one of the most important parameters to look at today and that is mainly because a high expense ration would affect the returns that a fund churns out. It is important to note that any mutual fund expense ratio is capped by SEBI today but it does help to have a lower expense return ratio to reduce the load on the returns you are aiming for.

 Who is your fund manager?

Probably the most important role to be played is that of the fund manager. He takes a call on the investments and even though it is a very process defined role – it makes sense to see his past results and his traits. It would also help you see the kind of funds he is managing other than yours. Keeping a close track on the deliverables on the scheme can help you gauge results too. If you do see a sharp change once the fund manager has changed, you can always take a call to exit also.

Asset size.

Many of us give this a miss and gives us a skewed sense of data too. In a top mutual fund, you would see that the debt of the fund would be much higher than equity markets – it would be mainly because most of the assets would be in debt funds. So, the lesser the assets under management in any fund would mean that they are risky. You would not be sure on the kinds of investors present and what the quantum on investment is.

It is of paramount importance to be sure of the kind of investment you are willing to make and if it fits your appetite. If you have a clear sense of investment in your head, it is an absolute no brainier that you invest in mutual funds and reap benefits after benefits on the long run. The first step is to start early and start investing today so that your corpus is a large one in a short span of time. If you had to invest in the mutual fund market, this would be the best time to start. You can have a clear idea on the kind of growth patterns that have been recorded and how well it would work for you in the short and the long run. If you are looking at saving today for a brighter tomorrow – mutual funds is the best way ahead.

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