How to pick the best mutual funds?
The Beginners guide how to pick a Right Mutual Funds
Many peoples are confusing when investing directly in the equity market. Directly invest in the stock market is very risky, So they have good choice divert to invest in Mutual Funds because as compared to the equity market, a mutual fund is less risky. For investing in mutual funds you do not need to be an expert. There is a professional fund manager who will manage your fund and take all the critical decision like which security buy or sale.
Yes, there are Many mutual funds in the market. However, there will be a few funds, can match your goals and give a performance as per you appreciate. Although it may take a little time to find such a fund, once you find such a fund, you have to just sit back and watch the movements.
A Beginners Guide to Pick Right Mutual Funds in Easy Steps.
Here are there few steps to select the right mutual funds that will help you to meet your investment goals.
1. To check Long-term track record when
When buying mutual funds many investors believe that if last 3-5 years returns were good, so it is a good idea to invest in that funds. But it is not good for all time, because for the past three years fund manager was maybe another fund manager as comparing today. So, you have to check who is managing your fund and also who was managing the fund in the past.
2. Expense Ratio of fund
This is one of the best parameters of investors looks at while choosing a mutual fund plan or comparing mutual funds with their peers. Expense ratio measures the per unit cost of managing a fund. It covers the manager’s fee, operational & administration costs, advertisement costs etc. Some mutual funds also charge expense or fees when you invest (entry load), or sales charge when you sell funds (exit load). Generally, the expense ratio is as high as 2- 2.5%. It needs to invest where a fund has been charged as a low expense so you can get more profit.
Also, you have one another option for reducing expense by investing directly in that fund so you have not to need any broker. Ex. If you would like to invest in HDFC mutual fund, you have to visit HDFC mutual fund’s website and open account there then you can buy fund direct online. In this process, you have not required any agent or mediator so you can save these expenses.
3. choose to invest in sector fund is good or bad?
First, you have to understand what is sector fund. Sector fund means That fund manager mainly invests on some particular sector like if you choose technological fund means this fund manager invest in that shares who are related to technology for an example he invests in Infosys, HCL Tech, Cyient etc. So, choose to invest in sector fund is may be risky. If in the future the technology sector will face bad impact or problems then shares price first will down, so your funds NAV or value will also down because your fund wholly depends on the particular sector.
4. Figure out the value of the mutual fund
In finance, the PE ratio is used for stock valuations. PE stands for the price-to-earnings ratio. PE Ratio is one of the most widely used tools for stock picking. It is also useful for valuation of stock index and mutual fund. Normally 40-50 PE is considered as high PE, so when investing in any fund or stock you have to compare and choose low PE fund or stocks.
5. Is really low NAV being good for investment?
You may have heard from many people, low NAV is good for investing in mutual funds because they get many quantities. So here it is not so important how many units you are getting. It’s mainly important how many amounts you are investing in the stock market. NAV stands for Net asset value. It’s represented a fund’s per unit market value. For example, you have 20 units at RS. 50 or 100 units at Rs. 10. So not favorable for buying more quantity for investment, because you want to get more quantity, investing the main purpose is not relevant to quantity it is relevant to quality, therefore you can get handsome profit from investment easily. If you really like this post then share and subscribe so you can get more information.
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