How to Maximize Gains from Mutual Funds in India
How do you make the most of mutual funds in India? How can mutual fund investments be profitable? Read on to know more.
Did you know that Unit Scheme 64 by UTI was the very first mutual fund in India? And the popularity of mutual fund investments has grown manifold in the country since then! So much so that by 1988, Unit Trust of India had over Rs 6,700 crores worth assets to manage!
So what makes these funds click as investment options despite the fact that they are “subject to market risks”, as mentioned in every disclaimer? Well, it is basically about doing it right. Choosing the correct funds and getting the timing right are both equally important. We look at some effective tips for reaping rich benefits from mutual funds in India.
Doing it Right with Mutual Funds
1. Choose a Good Fund Manager: You will need a good manager who will call the shots for the funds invested in. Looking for a reputed asset management company and a fund manager with experience is your best bet. However, it is important to remember that there are managers who act as mentors for their successors through several years. So, if you find a fund that is performing well consistently but has a new manager, it could well be a worthwhile option to consider too.
2. Consider Sector Balancing: Every mutual fund invests in different types of sectors. What you should look for is a balanced distribution of funds among sectors. This would mean that the fund reserves have been diversified well for risk mitigation.
3. Keep Long Term Returns in Focus: For any mutual fund in India that you choose, you will always need to focus on long term returns, a little over 10 years is fine. You might also want to check the rate of return. What you also need to ascertain is whether the fund you wish to invest in has been consistently outperforming other funds in the same category.
4. Consider the Cost of Purchase: Choosing front end loaded funds, where you will be paying the fees as well as commissions while making the investments, could be a good choice. You can avoid expensive charges for management. Paying attention to the expense ratio of the fund is as important. A ratio higher than 1% is not advisable.
5. Turnover Ratio is Important: Turnover ratio refers to how many times investments are bought and sold within a fund. A turnover ratio of less than 50% shows that the fund manager has confidence in the funds and is not trying to time the trends in the market for maximizing gains.
If you think all this information is too much for you to handle, the good news is that you will not need to make all these assessments alone. You will have a fund manager and financial planner for support and assistance.