Skip to main content

Choose the right fund to attain your financial goal

 

Know your investment needs and check the track record of fund houses before investing in MFs

 


   FOR AN investor taking his first baby steps into mutual funds investing, there is a bewildering array of choices. There are several hundred equity mutual fund schemes with a wide difference in performance between the best and the worst in terms of returns. While some funds come up with stellar performance, there are several that fail to even meet the benchmark. Besides the existing schemes, there are a host of new fund offers lined up by the MFs. Then there are a host of proposed asset management companies planning to join the 37 already in the fray. Given the choice, investors find it difficult to choose a right partner. Here are a few things that you can look at while choosing the right fund.

IDENTIFY WHAT YOU WANT

Many people are quite happy taking the Rajdhani Express to travel from Mumbai to Delhi. However, if you need to get there in four hours it becomes imperative to take a flight. Similarly, you need to know your investment goals and the time period required to get there.


   The same holds good for investments. Know where you want to be and by when. If you can define your goal well, you can better find a solution for the same. If you are looking for earning a 15% post-tax return year-on-year, you need to have a diversified equity fund in the portfolio. But if you are content with an 8% assured return, you may consider shunning equity totally.

LOOK AT THE PORTFOLIO

Think from the portfolio point of view. First ascertain the weightage of the instruments. Consider expected returns. If you require higher returns from equity component of the portfolio, you may have to increase the weightage of 'high risk -high return' funds in your portfolio.

INVESTMENT OBJECTIVE

There has to be a congruence of goals. The fund objective should match with your objective. Also, the fund objective makes you aware of some of the inherent risks associated with the fund. For example, a fund that aims at capital appreciation in the long term by investing in FMCG stocks is riskier than a fund that aims at capital appreciation in the long term by investing in companies across sectors and across market capitalisation.

PEDIGREE OF THE FUND HOUSE

Check the performance history of the fund house. Check its fund management and research expertise. The fund house must depend on an established investment process rather than a star fund manager. It has been observed that asset management companies are now more than ever willing to share this information. You should spread your money across 10 equity schemes, so that you get a proper mix for your portfolio.

TRACK RECORD

Check the historical track record of the fund. Avoid funds that do well only in specific circumstances, if you cannot track the changes in market sentiment. Consistent track record is a virtue that brings peace of mind to investors. Consistent track record is sometime misunderstood as earning 25% returns every year. But it is not the case, consistency means outperforming the benchmark across time periods. You may choose to compare a fund's performance with that of its peers.

PORTFOLIO

Portfolio of the mutual fund is also an important variable to watch out for. Diversification is a major benefit MFs offer to retail investors. To enjoy the full benefit it is required that you invest in a well-diversified fund. In a diversified equity MF ideally, a stock should not constitute more than 10% of the portfolio and a sector should not constitute more than 25% of the portfolio. In a sector or thematic fund, however, this may not hold good. But one could look for a portfolio that is internally de-risked by taking exposure to businesses with varying business models, varying product offerings, varying geographical exposures, etc. Or better still, you can use model mutual fund portfolios made by investment advisors. We create model MF portfolios which investors can replicate based on their investment needs.

EASE OF TRANSACTION & TAXATION

This is a new variable. With the elimination of entry loads, not all distributors are offering a wide choice of schemes. If your dream fund is not on the menu card available with your neighbourhood distributor, better check the price you pay for investing in that fund. This is specially important if you are investing small amounts. As they say get it wrong quickly, you may realise that some of your calls have gone off target. You may prefer to get out of a fund quickly. Hence, it makes sense to check the exit loads attached with the fund, if any. Also it's the posttax returns that determines the portfolio performance. Since equity mutual funds enjoy zero tax, if you hold on to them for more than one year, it makes sense to remain invested in equity funds for at least a year.

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

How Tax Deducted at Source (TDS) works?

    THE tax season is here. And if you are an employee you can't blame your employer for deducting large chunks of money from your salary towards tax deducted at source ( TDS ), which he is legally obliged to do. Your bank will also deduct some percentage from your FD interest of Rs 10,000 or more towards TDS! So what is this TDS all about? How is it computed? Are there any changes this year? Read on... What is TDS? TDS reduces your taxable income and could even provide tax relief! The TDS collections account for 40 percent of the total taxes collected in the country. As the name suggests TDS is the amount of tax that is deducted at source in certain types of income . The TDS thus collected is deposited in the Government treasury within a specified time. How is it computed? Some of the types of income where TDS is applicable include salary, interest, rental fee, interest on securities, insurance commission, dividends from shares and UTI/Mutual Funds, commission and brokerage

Modern day balanced mutual fund approach

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   In reality, most balanced funds have a strong tilt towards equity instead of a mix of equity and debt THERE are various types of mutual funds available to investors with specific features. Often investors have a particular idea about a specific type of funds in terms of their features and risks, but that is not what is actually available. Therefore, it is necessary for an investor to understand the actual position before picking up a fund. This requires some work on the part of the investor. One example can be the situation with balanced funds. Name is not representative: One of the first things that an investor has to understand is that the name of the fund is often not representative of its investment pattern. The name often represents only the aim of the fund, and not what it actually is.

ELSS Tax Saver

ELSS Stands for Equity Linked Savings Scheme.   ELSS Fund are mutual funds with 3 years of lock in period and offer income tax benefit under section 80C. They are open ended to purchase. Not all Mutual fund Investments are eligible for tax exception. List of Tax Saving Mutual Funds   Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) HDFC TaxSaver ICICI Prudential Tax Plan DSP BlackRock Tax Saver Fund Birla Sun Life Tax Relief '96 Reliance Tax Saver (ELSS) Fund IDF

Should you invest in tax-free infra bonds?

THOSE looking to save tax should take note of the latest buzz in the debt markets. Power Finance Corporation ( PFC ) and Housing Urban Development Corporation (Hudco) have launched bonds that will help you save more tax than your regular infrastructure bonds. Soon, IRFC and NHAI are likely to follow suit with similar bonds. KP Jeewan, general manager, debt markets, Karvy Stock Broking, says: "The coupon in these bonds are completely tax-free and those in the highest tax bracket can expect an effective yield of 10.75 per cent, compared to the 9.5 per cent a 10-year public sector bond would offer." The PFC and Hudco offerings are of 10- and 15-year tenures, with coupon rates of 7.5 and 7.75 per cent, respectively. Unlike other regular tax-free infra bonds, the tax benefits in these bonds are not capped at ` 20,000. Even besides these tax free bonds, those in the highest tax bracket have had plenty of opportunities to invest in tax saving infrastructure bonds under 80 CCF i
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now