I am sure there will be hardly anyone who would disagree on the statement that when it comes to investing the most important factor is selection. Selecting the right trade for the right stock at the right time is the most important aspect of successful investing and so today we will discuss the selection of mutual funds. Selection of Mutual funds is divided into 4 steps.
1. The first and the most important aspect of selection is you should not only know but understand the types of mutual funds available at your disposal.
Check out – Types of Mutual Funds
2. Once you understand the type of mutual funds you should understand that not all the funds in the same type of industry perform the same and you should select the best performing funds among the type of funds you want to invest into.
Let us say that you want to invest in a debt fund. You should know the best performing debt funds you can invest into to gain the maximum return for your investment.
See my Best Performing Mutual Funds
3. Now you have the list of best performing funds from the type of funds you want to invest in. The nest thing you should understand is, Is it systematic investment the right decision for you or a one time investment can help you more.
I always prefer Systematic Investment Plan
4. Once you have done all the homework the last thing you should understand is what investment option is best for your need – Growth or Dividend? I have discussed with very minute details and with very simple examples.
Which Is Right for You Growth or Dividend?
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{ 13 comments… read them below or add one }
your idea about mutual fund investment is worth mention
i like your posts and am a regular vistor of the blog
Mutual Fund is a risky investment. Investor must invest in the secure instruments like PPF, FD, NSC etc before investing in the Mutual Fund.
Yes, investor must know about the fund and specially risk/ return matrix of the fund.
But, It is not easy for the common investors to choose the most suitable investment for them. Investor can do following to minimize risk:
1. Must ask the relationship manager about the risk involve in the fund.
2. Performance of the fund in last 2 years if fund already lunched.
3. Performance of similar fund in last 2 years.
4. Total Asset Value of that fund. (Only invest in the fund which net assets is more than Rs500 Crore).
5. SIP would be a better choice.
6. Invest for the longer term.
7. There is no entry load and for period more than 1 year, no exit load also for most of the mutual funds.
8. Set your return target and exit at that return.
9. And the last- do not forget after investing…. because it is your hard earned money….
In my the newly started “Index funds” are the best option. because the index funds would invest in all the stocks in that index we choosen. suppose if you choose Nifty-50, they will invest in all nifty 50 stocks in same ratio as they weigh in index. you can directly also make the same through buying all these 50 stocks, but the investment required would become so large. but mutual funds also even small amounts.
the fund movement reflects the movement of underlying index.they are presently offering by IDBI mutual fund.
Shabbir, your blogs are really informative and helping lots of amateur investors like me. I recently moved aboard for long term say 5+ years. I am 30 years old and married but no kid. I am planning to start investing 50,000 INR monthly in Stocks/Mutual funds from July. Its difficult for me to track stocks, so would need your expertise to select 5 funds and % money allocation (out of 50,000 INR). After reading your blogs I have already made up my mind for Sundaram Midcap and HDFC top 200. Can you suggest me remaining three? I would prefer a fund which has track record of giving 20+ annualized returen since last 5 years. Thanks Mate.
Manish, See http://shabbir.in/best-performing-mutual-fund/
very nice article… Its informative…
Thanks for the nice blog.
One thing I dont find here (understand) is “how should I dstribute money”.
Lets say for ex, I select 1 equity and 1 debt and 1 balanced fund and I am looking for higher returns then how should I invest?
Thanks
Ankush
Ankush, Thanks for that suggestion and I have some articles on stocks but I will come up something for a fund as well and update here.
Ankush See http://shabbir.in/how-to-distribute-money-in-funds/
Hi Shabbir,
I have invested Rs.10,000 (lumpsum and no SIPs thereafter) in Sundaram PSU opportunities in Jan 2010 and is almost a year now. Should I continue to hold or redeem and invest in some other funds? Planning to invest either in HDFC top 200 or HDFC mid cap. Below is my current portfolio, please advise.
Sundaram tax Saver
Sundaram PSU Opportunities
Fidelity tax advantage
Can Robecco equity Tax saver
PSU has never been my choice because I don’t buy the theory that overnite Indian government related stock can be that good to get double the valuation.
sir,
I am a very small amount to invest. so my qurry is is it necessary for 5000 rs for each and every mf? or can i directly utilise my 5000 amount for more mfas sip for every month
You can opt for 500 Rs SIP into one fund for 10 months.