We are often asked by clients to suggest please tell us which is the
best mutual fund that I should invest in or please advise which mutual
fund should I buy?
There is no single fund or scheme that can be described as best. NO fund or scheme fits into all the criteria for all investors. If there was a case then why would mutual funds companies launch 100’s of schemes? Every scheme has different benefits, is suitable for different time frames and carries different risks associated. If you ask an advisor, I want to invest INR 10000 per month, please tell me which fund should I invest in and he says invest in XYZ fund. Believe me he should be the last person whose advice you should accept.
As written earlier investors need to take into account lot of factors before deciding which fund they want to invest in. So if you want to invest in a mutual fund think of
Purpose and period of investment: Mostly investors have a purpose that they want to save for and based on that purpose they decide on the time frame that they can stay invested for. So lets say if you want to save for a car, then the time frame you are looking at is more or less 2 – 3 years, if you want to save for your kids education then you are thinking of roughly 10 – 15 years and if you are saving for your retirement then you are thinking for 20 – 30 years. Various kinds of funds also have different time frames that they are suited for. Like equity diversified fund will be more suited for a longer time frame, a balanced fund for a long term to mid term and debt and FMP for short durations. So the purpose and the suitability of the kind of fund with respect to the time frame you can remain invested for should be taken care of.
Risk profile: Every individual’s risk profile is different from the other. There are risk takers, risk neutrals and risk averse investors. Risk takers are the ones that are even ready to pay premium in order to get higher returns, risk neutral will be someone who will like to take little risk for high/mid returns, whereas risk averse will be someone who will take low returns but will not take any risk on the capital invested.
Similarly different category of funds also comes under different risk profiles depending on the underlining product they invest in. A fund that invests only in equities is of course more risky than the fund that invests in debt products.
Age profile: The age bracket one is in, responsibilities fulfilled, responsibilities pending and personal personality often determine the risk an individual can take. Keep this factor in mind while choosing the option you choose makes complete sense.
Past performance:
Who would you place your bet on to score a 100, Sachin Tendulkar or Rohit Sharma?
Of course Sachin, because he has performed over the years which even though is not a guarantee of future performance but gives us the reason to expect that he will score a 100.
Comparison can give you the wrong picture if you compare two different things. If you compare an apple with another apple the results will be valid and would serve good purpose, but if an apple is compared with an orange then the results will not serve any purpose and the decision taken on that behalf will always be wrong. Hence while choosing between two funds it should always be borne in mind that both the funds should belong to the same category and invest in the same asset class.
Size of the fund: Even though size of the fund does not matter directly but indirectly it does have an impact. Large funds more or less have a defined structure and protocols that are followed by fund managers. So even if the fund manager leaves them it does not affect the performance of the fund to a large extent.
Choosing the correct fund that you want to invest in has never been an easy task for an investor but with technology giving access to information, if investors weigh their options on the factors discussed then the chances that they will be able to choose the appropriate fund are pretty high. The best way still would be to take professional advice from people that deal with mutual funds.
VISIT http://www.NriCapital.com/
There is no single fund or scheme that can be described as best. NO fund or scheme fits into all the criteria for all investors. If there was a case then why would mutual funds companies launch 100’s of schemes? Every scheme has different benefits, is suitable for different time frames and carries different risks associated. If you ask an advisor, I want to invest INR 10000 per month, please tell me which fund should I invest in and he says invest in XYZ fund. Believe me he should be the last person whose advice you should accept.
As written earlier investors need to take into account lot of factors before deciding which fund they want to invest in. So if you want to invest in a mutual fund think of
Purpose and period of investment: Mostly investors have a purpose that they want to save for and based on that purpose they decide on the time frame that they can stay invested for. So lets say if you want to save for a car, then the time frame you are looking at is more or less 2 – 3 years, if you want to save for your kids education then you are thinking of roughly 10 – 15 years and if you are saving for your retirement then you are thinking for 20 – 30 years. Various kinds of funds also have different time frames that they are suited for. Like equity diversified fund will be more suited for a longer time frame, a balanced fund for a long term to mid term and debt and FMP for short durations. So the purpose and the suitability of the kind of fund with respect to the time frame you can remain invested for should be taken care of.
Risk profile: Every individual’s risk profile is different from the other. There are risk takers, risk neutrals and risk averse investors. Risk takers are the ones that are even ready to pay premium in order to get higher returns, risk neutral will be someone who will like to take little risk for high/mid returns, whereas risk averse will be someone who will take low returns but will not take any risk on the capital invested.
Similarly different category of funds also comes under different risk profiles depending on the underlining product they invest in. A fund that invests only in equities is of course more risky than the fund that invests in debt products.
Age profile: The age bracket one is in, responsibilities fulfilled, responsibilities pending and personal personality often determine the risk an individual can take. Keep this factor in mind while choosing the option you choose makes complete sense.
Past performance:
Who would you place your bet on to score a 100, Sachin Tendulkar or Rohit Sharma?
Of course Sachin, because he has performed over the years which even though is not a guarantee of future performance but gives us the reason to expect that he will score a 100.
Comparison can give you the wrong picture if you compare two different things. If you compare an apple with another apple the results will be valid and would serve good purpose, but if an apple is compared with an orange then the results will not serve any purpose and the decision taken on that behalf will always be wrong. Hence while choosing between two funds it should always be borne in mind that both the funds should belong to the same category and invest in the same asset class.
Size of the fund: Even though size of the fund does not matter directly but indirectly it does have an impact. Large funds more or less have a defined structure and protocols that are followed by fund managers. So even if the fund manager leaves them it does not affect the performance of the fund to a large extent.
Choosing the correct fund that you want to invest in has never been an easy task for an investor but with technology giving access to information, if investors weigh their options on the factors discussed then the chances that they will be able to choose the appropriate fund are pretty high. The best way still would be to take professional advice from people that deal with mutual funds.
VISIT http://www.NriCapital.com/
No comments:
Post a Comment