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Mutual Fund series : The final step

After having been through the following steps :

  1. Why mutual funds?, and
  2. Which theme, sector or cap fund?,

the natural next step is to find the right mutual fund to invest in. This is as easy as going from A  to C.

A – Where to evaluate :

These sites provide more than enough resources to efficiently evaluate mutual funds:  Value research online or Moneycontrol.com

B – How to find the right fund

For a fair comparison, in the same sector, theme or cap based, it is best to compare the peers. For this, make the following selection (I have taken valueresearchonline as a reference) :

  • Ranking : top 10 or top 20,

 

  • Investment option : can be either of following :
    • Open ended : you can start investing any time you want,
    • Close ended : the fund only accepts new investors during a specific time,
    • Personally, I prefer to select the Open ended funds,

 

  • Fund category : Based on the Step 2 (Which theme, sector or cap fund?), select the fund category, that you like to invest into. It can vary within any of the following :
    • Debt OR Equity
    • Pharma OR Financial services OR FMCG OR Banking,
    • Large Cap OR Medium and small cap

 

  • Select time period : the most important parameter for me. My personal thoughts:
    • 1 year performance might be a fluke or exceptions,
    • The time period should be atleast 3-5years to allow for any spikes or falls,
    • Longer the time period, more consistent view of the fund performance,
    • Consistent the performance, more confidence on the fund manager,
    • Smart fund manager, means more security for my hard earned money,
    • More security, means more probability for my money to grow,
    • More money growth, better the fund for me to invest.

 

C – How to evaluate the results

Congratulations!!! now you have the final list of the mutual funds, that made it on your final list. It is relatively easy from now on. Check for the following :

  • 3/5 year returns : by default, the funds are ranked by the highest returns. So, the best performer for the selected time period (3/5 years in my case), are at the Top.

 

  • Net Assets/Fund size : refer to the last point in Step B. Bigger the corpus size, more confidence of consistent performance and safety of investments. 

 

  • Good to know : following are good to know (for me not a deciding factor when making long term investment) :
    • Expenses ratios of different funds,
    • Ranking of the funds for the selected time period.

 

This is where you select the mutual fund to invest into. If you have been through the previous posts (Mutual Fund series : Why mutual funds? and Mutual Fund series : Which theme, sector or cap fund?), you should be able to pick a fund best suited to your needs and financial goals. 

I hope you found this series useful and informative. I will welcome any comments or feedback from you.

There is always scope for improvement. If you have ideas on how I can improve or any other topics I should cover, I look forward to hearing from you at financialblogger12@gmail.com

 

Wish you successful investments!!

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General Mutual Funds series : The Final Step

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