I am sure that you remember the TV commercial where they said at one go that “Mutual fund investments are subject to market risk. Please read all scheme related documents carefully before investing.” Well, that is exactly what we are talking about here as well. While it has been proven that mutual funds are one of the most extensively invested segments, you must also know about certain factors that you should keep in mind before taking the plunge. It is always advised to be careful and read in details instead of being impulsive with money.
- The objective your investment: It is obvious that every mutual fund has an objective. This is what you need to know about. It assists you in helping to decide about the investment and the numerous types of asset classes that exist. On a personal level, you too must be having some objective in mind. This is why you must make a clear analysis of the alignment between your objectives and that of the mutual fund. If you are able to find common ground, then you may invest. But if it varies, then you may want to look for other options.
- The style of investment: Coming to the style of investment, you will never feel restricted. This is because there are many options available for you. you can pick from large cap, mid cap or micro-cap. For those who of you who are unaware of what I am referring to, in simplest terms, these can be explained as market capitalizations which help you to make your corporate portfolio enhanced and refined. The funds need to be managed with expert knowledge and strategic skills. This is why you must think about that and consider the money inflow on a regular basis.
- Performance of the funds: When we talk about the fund performance, we are referring to the history of the fund and want you to consider how it has been able to deal with money in the past. You must be able to measure the performance over a considerable period of time. This will give you an idea about all the ups and downs and ways in which it was affected. In case you are unable to do this on your own, you must hire a professional who has knowledge about mutual funds and can aid you.
- The fund manager that you hire: Last but definitely not the least, the fund manager that you hire is also important. This is because it is essentially the fund manager who is given the duty to channelize your resources in the correct direction. He or she needs to have the necessary qualifications for sure. However, more than that, the experience also makes a lot of difference because one you are working, you are able to gain a deeper insight into the functioning of the industry at large.
These are some factors to be kept in mind while the others are expense ratio and exit load.