Mutual funds offer investment solution for a variety of investment needs for investors in all age groups. You can invest in them with an aim to create wealth, achieve different life-stage goals e.g. retirement planning, children’s higher education, vacation planning, property purchase or create an income stream during retirement. But, the most important Question that arises before you start investing is how to choose mutual funds which may meet your investment objectives?
Before you endeavour how to choose mutual funds, you must know the following 3 things -
Defining different financial goals is most important aspect to prepare an investment plan. You should lay-out all your goals in different stages of life factoring in inflation so that you have an actionable plan i.e. how much and where to investment and for how long! Once these are ready, you should think of how to select mutual funds which helps in meeting these objectives.
Risk refers to an adverse financial outcome against your expectations. Some people have higher capacity to take risks than others. Your risk appetite depends on your age, stage of life, personal and financial situation. If you can assess your risk well, you will know how to pick a mutual fund basis your risk appetite.
Different asset classes have different risk profiles e.g. debt funds usually have lower risk than equity funds. You should understand that risk and returns are directly related. Asset allocation aims to balance risk and return in achieving your financial goals. If your risk appetite is higher, you can have higher allocation to equities and vice versa. You should invest in the right asset class depending on your financial goal and risk appetite and for that you need to know how to choose the right mutual fund.
Below are some factors, which if considered, you will know how to choose a good mutual fund considering your financial goals, risk appetite and asset allocation -
Mutual funds offer products that can provide solutions for a large variety of financial goals, investment tenures, risk appetite and liquidity needs. If you evaluate the factors discussed herein, you will know how to select mutual funds in India. Evaluate these factors and make informed investment decisions before selecting the best mutual funds. You should always take the help of a financial advisor if you have difficulties in understanding the investment characteristics of mutual funds.
Disclaimer:
An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund. All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) including the process for change in address, Phone number, bank details, etc. Investors should deal only with registered Mutual Funds details of which can be verified on SEBI website (https://www.sebi.gov.in) under ‘Intermediaries /Market Infrastructure Institutions’. For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Centre section available on the website of Mirae Asset Mutual Fund. Investors may lodge complaints on https://www.scores.gov.in against registered intermediaries if they are unsatisfied with the responses. SCORES facilitate you to lodge your complaint online with SEBI and subsequently view its status.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.