Choosing
a mutual fund is very crucial and while selecting a mutual
fund following factors shall be kept in mind:
Vintage:
For
how long the fund has been in business - the longer the better, for in general
more one is engaged in a particular trade more intimately one knows that
business. UTI Mutual Fund is the pioneer in India.
Nature of Ownership:
I
will prefer and advise government owned or public sector (PSU) mutual funds for
the following two reasons:
Though
slow and inefficient in providing good customer service, generally PSUs do not
take customers on a ride through the fine print in the contracts.
In
case the organisation gets into financial troubles, the government will step in
with the rescue-act.
Size:
Size
does matter. Bigger the size safer it is. One can take the assets under
management (AUM) as the parameter to measure the size. India’s
Top Ten Mutual Funds command over 80% of the total assets under
management.
Growth Funds:
Funds fall under two categories namely income and growth funds.
While income funds distribute regular dividends (some
times obnoxiously out of capital instead of profits) growth funds reinvest the profits.
For long term wealth creation, growth funds are preferable.
Diversified Index Funds:
Well diversified index funds are preferable for the following
advantages:
- Diversity produces safety
- Index funds are passive and therefore involve lower fund administration cost
Conclusion:
In
conclusion careful consideration is required while choosing the right mutual
fund to invest in for the purpose of attaining financial
freedom and wealth creation.
Related Links:
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| A Few Mutual Fund Examples |
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