How to Select the Best Performing Mutual Funds

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How to Select the Best Performing Mutual Funds

• It is general perception of any person to conduct
  research before selecting the best investment
  options. It is so because the individual wants to
  be assured about the genuineness of the
  investments that he will be making. Mutual funds
  are most sought after investment and selecting
  the best one is not a cake walk affair.

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• In fact cornering the Best Performing Mutual
  Fund is like selecting the right life partner.
  Any wrong decision can wipe out personal wealth.
  Also volatility of the performance of mutual
  funds makes the things more difficult. Some
  people select mutual fund on the basis of their
  rankings while other select on the basis of the
  returns they offer.

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1. Investment Objective

• One should understand the investment objective as
  why we are investing and this objective may be
  long term, short term or linked to any events
  like wedding etc. Based on this objective the
  risk factor can be decided. In other words, how
  much risk one can take with the investments.

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2. Outlook for Economy

• Based on outlook for the economy in future, one
  can select sub class of mutual fund. This step is
  purely judgmental based on current situation as
  no one can predict the scenario accurately. One
  should just listen to the mind before making any
  assumption in this step.

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3. Rankings

• Mutual Funds India are listed as per certain
  ranks in tune to their performance. Normally
  mutual funds are ranked on various factors with
  highest weightage to returns, so the best method
  is to pick the top 2 ranking mutual funds that
  your trust the most and then select mutual funds
  within shortlisted sub class that have 5 star or
  4 star and pick the common between the two which
  is your final listings on ranking front.

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4. Asset Under Management

• Net assets of any fund provides fair idea of the
  confidence level of the investors in mutual fund
  scheme and this trust is build over the time
  period. Also the fund houses deploy best fund
  managers for best schemes with high Asset under
  management (AUM). So based on this aspect, you
  can drop mutual fund schemes with below average
  AUM in particular mutual fund sub class. 

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5. Exit Load

• It is vital to check exit load of mutual fund
  scheme as one might require money before
  investment horizon. It is advisable to drop
  schemes that has stringent exit load from the
  shortlisted ones and that do not suit your
  requirements. It is best to retain the schemes
  with minimum exit loads requirements.

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6. Consistent performance

• For ranking of mutual funds or for any analysis,
  one Year return of any mutual fund is taken into
  account. It is advisable to check the consistency
  in the performance and for that one should check
  3 year and 5 year returns of the scheme so that
  one gets the clear picture if the mutual fund
  scheme is consistent in performance or not?

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