For Selecting a Mutual Fund, First you need to make two decisions
- Fund Category
- Select Exact fund from the Category
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| How to choose Mutual funds |
1. Choosing a Fund Category
This is very simple process and you can easily identify How to Choose Mutual Funds, there is a Two simple process to Identify fund category.
- For how long do I want to Invest -
You need to ask first yourself after how much time you will need the money because that will determine the category of funds you can choose to pick
- How much risk you will take -
The second and most important question is about your risk appetite. There are mutual fund that cover the entire risk spectrum - from low risk to high risk.
Below is the Answer of both the Questions :-
1. If you risk appetite is low or investment duration is less than 1 year than fund category will be Liquid Debt Fund
Some Examples - ICICI Prudential liquid fund, Yes liquid fund, LIC MF Liquid fund, Sundaram liquid fund, DSP liquidity fund, Parag parikh liquid fund, Quant liquid fund, Nippon India liquid fund, Aditya Birla sun life Liquid fund, JM liquid fund, SBI liquid fund.
2. If you risk appetite is low or investment duration is 1 to 3 years than fund category will be Low duration debt fund.
Some Examples - Aditya birla sun life low duration fund, HDFC low duration fund, Sundaram low duration fund, JM low duration fund, Kotak Low duration fund, Nippon India low duration fund, L&T Low duration fund, SBI Magnum low duration fund, IDFC Low duration fund, Mahindra Manulife low duration fund, BNP Paribas low duration fund, DSP low duration fund, HSBC low duration fund, BOI AXA ultra short duration fund.
3. If you risk appetite is Moderate risk or investment duration is 3 to 5 years than fund category will be Hybrid Equity Fund
Some Examples - SBI Equity hybrid fund, Mirae asset Equity hybrid fund, Canara Robecco Equity hybrid fund, HDFC Equity hybrid fund, BNP paribas substantial Equity hybrid fund, Axis Equity hybrid fund, IDFC Equity hybrid fund, Kotak Equity hybrid fund, Tata Equity hybrid fund, Sundaram Equity hybrid fund, Navi Equity hybrid fund, Franklin India Equity hybrid fund, PGIM India Equity hybrid fund, UTI Equity hybrid fund, Aditya birla sun life Equity hybrid 95,fund.
4. If you risk appetite is Moderate risk or investment duration is 5 years or more than fund category will be Multi-cap Fund and Large cap fund
Some Example Tata large cap and mid cap fund, LIC large cap and mid cap fund, ICICI Prudential large cap and mid cap fund, Sundaram large cap and mid cap fund, HDFC large cap and mid cap fund, HSBC large cap and mid cap fund, Mirae asset large cap fund, Nippon India large cap fund, LIC large cap fund, HSBC large cap fund, BNP Paribas large cap fund, Tata large cap fund, IDFC large cap fund.
5. If you risk appetite is High or investment duration is more than 7 year than fund category will be Small and Mid cap fund.
Some Examples - Axis small cap fund, Nippon India small cap fund, SBI small cap fund, BOI AXA small cap fund, Quant small cap fund, Tata small cap fund, Kotak small cap fund, HDFC small cap fund, Canara Robecco small cap fund, Union small cap fund, DSP small cap fund, UTI small cap fund, PGIM India small cap fund, Principal small cap fund, Edelweiss small cap fund.
Once you selected the Fund Category that matches your risk profile, next is how to select exact fund from the above categories -:
2. Select Exact fund from the Category
# Return Consistency - Look for Consistency in performance over longer tenures like 3,5, or 10 years. Select schemes that beat their benchmark and category across market cycles.
# Downside Protection - Down side protection means how fund protect investor money .
# Fund Manager Expertise - The experience and tenure of the Fund manager is playing a significant roll in Mutual funds.
# Fund House History - Before choosing any schemes in mutual funds, first check funds history or its presence in the mutual fund industry and consistent track record.
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