Q What are the parameters on which a Mutual Fund scheme should be evaluated
Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoters image are some of the key factors to be considered while taking an investment decision regarding mutual funds.
It was a good answer on necessary parameters on which a Mutual Fund scheme should be evaluated. Even I am stuck to decide what kind of investment would be best for long term. This answer has provided some info about MFs but still want to explore more options so might consult a
certified financial planner sometime next week.
Mutual fund investments always come with a disclaimer that they are subject to market risk. Hence, before investing your hard-earned money on any mutual fund scheme, one needs to thoroughly consider the following parameters:
1) Total expense ratio: A high expense ratio significantly affects the fund's returns. Most of the management and distribution expenses are taken care of by the scheme itself. Hence, an investor must carefully deliberate on the different expense ratios offered by different schemes and then invest.
2)Performance Ranking: An investor must look up the quarterly ranking of any mutual fund scheme to check how profitably it has fared among other prospective schemes.
3)Fund Manager and Tenure: Simply buying the mutual funds and storing them in your
Demat account is not enough. A consultation with the fund manager is also important as ultimately he/she decides in which direction the scheme is headed. Make sure that you go through the past performance records of the fund manager to avoid any possible risks.
4) Exit Load: Exit load is charged by mutual fund schemes when an investor decides to leave the scheme midway. Make sure that you check out the exit load percentage before signing on any scheme.
In my previous answers, I had mentioned about various parameters such as total expense ratio, performance ranking, fund manager and tenure, and exit load. However, the objective of the fund and its NAV over the last one year is also crucial. The objective helps you in decision making and whether to invest short-term or long-term. For more details about mutual funds, you can refer to this