Thursday, 16 July 2015

6 Ultimate Tips to Select Best Mutual Funds for Beginners

Posted by MyInvestmentsPub
Investing in Mutual funds is undoubtedly a best long term investment approach. Investing into Mutual funds through SIP approach is a well known proved concept, however selection of Mutual funds is a tough decision. Many young investors facing problems in selecting the right mutual funds to cater their financial goals. Because of the current lifestyle and lack of awareness, investors are unable to identify the right Mutual funds for their investment portfolio. This mistake results not only the precious time loss but also end up with insufficient corpus to your financial goals. I am suggesting the following tips to choose the right and best performing Mutual funds that would give you the best returns to your investments.

6 Ultimate Tips to Select Best Mutual Funds

1. Analyze Your Financial Goals:

Every person will have long-term financial goals and short-term financial goals. Before selecting a Mutual fund to map it to your financial goal, first you should analyze your financial goal that you are going to map with a mutual fund. If your financial goal is long-term like your children education, children marriage etc., then you should select Large cap or Large & Mid cap or Mid & Small cap Equity funds. Because Mutual funds under these categories high risk and high yielding Mutual funds. Your risk will be averaged in the long term and you will be end up with handsome returns from these Mutual funds. If your financial goal is short-term like vacation, buying a vehicle etc., then you should choose less risky Mutual funds like Debt Mutual funds or Hybrid Mutual funds. Because the time horizon for your financial goal is less, you should select moderate or less risky Mutual funds.

2. Check the Consistent Performance of the Fund:

Many experts advise that it would be improper to come to a conclusion on the basis of a year's performance. Such performance can be due to a few chance allocations to certain stocks or sectors. Some times some Mutual funds like sector or theme based mutual funds would yield highest returns because of positive wave to that sector in the market. But if there is any negative impact on that sector, these sector mutual funds would drop drastically. For example, during IT boom, all IT sector based Mutual funds reached to their highest peak level. But post 2008, all these Mutual funds are blasted and resulted huge losses to the investors. So, you should not consider the current performance levels, but to see at least last 5 years performance levels of that Mutual fund. Then only, you can understand the mutual fund's performance level during market oscillations.

3. Assess the Diversification of the Fund:

A well diversified mutual fund shows a more steady performance over time which leads to a market-beat or inflation-beat performance. Because the investments of a good diversified mutual fund will not limit to few sectors and stocks but into various promising sectors and stocks. This approach would shield the returns from the market turbulence and ultimately results into good returns over a long period. A wide-ranging portfolio usually has a lower risk exposure than a portfolio based towards one particular sector, stock, or asset category. Adding to this, one should also maintain diversification in fund houses. I advise to select good diversified mutual funds from different fund houses. This gives you complete diversification in not only stocks but also style of investments.

4. Verify Mutual Fund AUM: 

AUM is nothing but the Assets Under Management which indicate how the mutual fund scheme is trusted by the investors. As a thumb rule, it is always advised to choose the Mutual fund that is having AUM > 100 crores. Generally new Mutual funds would have lesser AUM, because investors ignore new mutual funds as they don't have enough track record to analyze. A good performing Mutual fund will always trusted by the investors and causes investment floods into this mutual fund. Hence these good performing mutual funds always have higher AUM into their bucket. So, AUM of a Mutual fund is also an important influential factor in choosing the right Mutual fund.

5.  Understand the Fund Fees and Charges: 

Mutual fund houses charges some fee on the investments for the services provided. These charges could be entry load, exit load and (or) expense ratios. You need to understand these fees and charges as these fees could be a factor in deciding your net returns. If you did not understand these charges, you will end up with huge dent to your earnings. You need to choose good mutual funds with lesser expense ratios and load fees. Initially it is bit difficult to identify the funds with lesser expenses, but during the course of time, it is very easy to find the funds with lesser expenses and better earnings.

6. Get Awareness About Fund: 

Last but not least, get some awareness about the Mutual fund that you are going to invest. You can read online blogs like FundsIndia or ValueResearchOnline etc. about the Mutual fund and get some idea about it's past performance levels, Investment strategy, expense ratios etc. This little awareness would help you to choose the right mutual fund. A basic knowledge about that mutual fund is enough in choosing the right mutual fund.

My Suggested Equity Mutual Funds:

Here are my suggested Equity oriented Mutual funds based on the category. You can directly choose the Mutual funds from each category and can start invest through SIP approach.

* Update as on 03-Jun-2019:


Choosing right Mutual fund is a crucial step in Mutual fund investments. Follow these steps which would yield ultimate returns for your investments.


  1. What should be the allocation percentage for each type of mutual fund. I want to invest 12k per month in 4 diff mutual funds(Large,diversified etc.) and moderate risk How should I allocate and to which fund if I dont have liquidity requirement for next 3 years?

  2. Also,Are Equity diversified funds good in comparison to other mutual funds?

  3. The allocation of your investments depends on your financial goals, time horizon and the sum you want to have at the end. You can reach me @ 09030013020 for planning your financial goals.

  4. Hello, I am looking for an investment of around 5k monthly in tax saving funds. I am planning to invest in the following manner. Suggest me if I should make any changes.

    AXIS LONG TERM EQUITY DIRECT G => 2000 per month

    Birla Sunlife tax relief 96 direct g => 2000 per month

    Franklin India Taxshield Fund - Direct Plan => 1000 per month

    I am confused between Franklin and DSP-BRTax Saver Fund -Direct (G), what should I pick and what amount should I allocate?

  5. I am not sure about your total monthly investment and investment objective. If the total amount is 5K, then I suggest to put the amount into different Mutual fund categories. Divide your amount into 3 parts, 2K -> Axis Long Term Equity, 2K -> L&T India Prudence Fund (Balanced Fund) and 1K -> Franklin India Prima Fund (Midcap Fund). Try to invest for at least for 5 years.

  6. which is best plan for beginner in mutual fund and i will invest monthly RS.500 for 12 months,which provides good returns.please suggest me a plan?

    1. Saravana,
      Start your first Mutual fund SIP in HDFC Balanced Fund and keep on investing atleast for 3 years to see good yields. 12 months is not sufficient time frame.

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  8. Sir i planned to save 5k into hdfc equity dp growth.kindly guide me which one is advisable splitting the amount into various sip like axis...which u said before or the one which i selected and also suggest me the risk factors between these both..Thanks in advance...

    1. Divide your amount into 3 parts, 2K -> Axis Long Term Equity, 2K -> L&T India Prudence Fund (Balanced Fund) and 1K -> Franklin India Prima Fund (Midcap Fund). Try to invest for at least for 5 years.