Mutual Fund is a fund, managed by an investment company with objective of high Rate of Returns.These investment companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner.
The Mutual Funds usually invest their funds in equities market, bonds, debentures,gold or other asset classes.
Types of Mutual Funds
The various types of Mutual Funds according to the investments are-
Debt Fund or Income Fund
Diversified or Balanced fund
Money Market Fund
Secor Based Fund
Two type of investments in mutual funds based on period:
Short term investments
Long term investments
Some key factors that you need to check while selecting good mutual fund.
Objective of fund or Scheme
Funds Objective depends on your capability of risk taking if worried about capital protection only you can choose for debt fund else you may think of large cap ,multi-cap funds.
Fund or Scheme type
If you're planning for short term, do not select close ended funds. Another thing you must keep in mind is fund is growth or dividend fund. Dividend funds provides you dividend at every year from profit.
You must do research about fund manager qualification and past experience. Ultimately fund manager makes fund healthy.
Asset allocation and Stock Holding
You should know Asset allocation and stock holding details in various sectors before investing.Rate of return on your investment depends on invested money.
Method of Investment
It is method of purchasing,investment period,selecting plan etc
One should always select SIP plan instead of doing one time investment at regular interval provides stability to profile and division of risk.
Many funds charges for entry load or exit load.You should consider percentage of load before making investment in any of the plan or scheme.
Past Performance Appraisal
Some mutual fund schemes gives you very high returns in short period, but it not good for investment,consider At Least last 3 year performance before making an investment.
Important factor which many people miss is standard deviation of Mutual Fund and it measures the volatility of the returns over a particular period of time.
Rating of Mutual Fund
Consider fund rate before making investment but,do not invest based on Rating.
Mutual Fund Investments are subjected to market risks. Please read the Scheme Information,Documents and Statements carefully before investing.