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Understanding Large, Mid and Multi Cap Mutual Funds
April 19, 2012

Mutual Fund pools the savings of the investors, who share a common financial goal and then invest the corpus collected into a number of financial instruments to maximize the returns. One of the ways to divide or identify a mutual fund is the criteria of market capitalistion.

Author : Debanjan Guha Thakurta

 5 Tips to pick a right mutual fund

5 Tips to pick a right mutual fund

From an investment point of view, there is no other option as good as investments made in mutual funds. Professionally managed, the fund managers at mutual funds keep a track of your hard earned money, so that you can sleep in peace even in the most difficult financial times.

Mutual Fund houses invest the corpus that they receive from investors in different types of financial instruments depending upon the objective of the fund. While choosing a fund however, you need to be mindful of the risk that you are taking with a fund. There are thousands of mutual funds available in the market but the big question lies how to choose the right mutual funds?

Below we share with you how to choose the right mutual fund:

Fund Objective:  The main criteria of choosing a fund lies in its objective of investment. The investor must look for the fund’s investment objective and match with his own.  For example, many mutual funds seek long-term capital appreciation while others seek growth. Some fund houses invests entirely in equities and some may be in fixed income and money market instruments. Furthermore, while investing in equity, the funds may choose mid-cap, large-cap, small-cap or mixed cap, where they allocate each and every categories of funds into the fund’s portfolios. So from an investor’s point of view, the investor should decide and try to match his investment objective with that of the fund

Fund Manager: The second most important factor is the name of the fund manager. It is often seen that a fund manager is performing well making money for its clients but when a new fund manager takes up his/her position, the new manager fails to keep up the good work of the prior manager and etc.

Past Performance: Although past performance doesn’t guarantee you that you will enjoy the same amount of profit for the coming year, but still it can give you a clear picture about the fund performance and how it had performed in the yester years and how it was managed during the periods. A fund giving a descent returns over a period of 3-5 years is generally stable and one can invest accordingly in consultation with his/her financial advisor.

Tax Benefit:  Mutual Funds give the investors a unique opportunity to save their taxes by investing into certain types of tax free mutual funds. Moreover, dividend earned by certain mutual funds is also tax-free giving the investors a wider access to earn money without paying taxes.

Expense Ratio: Expense ratio is the annual charges charged by the fund houses. Generally, the expenses ratio includes the administrative costs, management fee and other operating expenses. Higher the management fee, the lower will be your returns at the end of the day. So it is always advisable to choose a mutual fund which has got a low expense ratio as compared with its peers.

How to check?

Each fund houses publish their own fact sheet on a monthly basis. An investor can go through the fact sheet to know more about the fund house. Similarly, all the necessary information along with the fund’s objective, name of the fund manager, past performance of the fund and expense ratio compared with the category is easily available in the fact sheet. Separately, investors not knowing how to find the fund’s factsheet may visit our website and get all the relevant details in a simple and easy way.

There may be other parameters also to choose mutual funds but these were the basic and the simple steps through which one can choose amongst the others.

The Content Team is part of iFAST Financial India Pvt Ltd

Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website.Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully before investing.

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