Choosing the best of MUTUAL FUNDS

One day, a close friend called me up from Bangalore and asked me " Yaar tax bahut kat raha hai koi tareeka bata jisse tax save ho jaye, koi achcha sa Mutual Fund wagarah.........", i gave him my fundas and satisfied him.

But after that I realised that most of the people like my friend invest in Mutual Funds with primary objective of Tax saving and not the Capital appreciation and in order to fulfill that objective we go for any MF without any deep analysis and giving it a thought. I have seen so many people buying a particular MF just because agent of that MF was easily reachable. Although primary objective of MFs should be Capital appreciation not the tax saving and in order to fulfill that a little research and knowledge is required.

I was going through performance of various MFs in recent times and i found that few of them have outstanding performance. Like SBI magnum, LIC, ICICI Prudential, UTI etc .... most of them outperformed the market in recent times and huge variety of funds are available to pick. Most of companies invest this money in various sectors like Telecom, Auto, Software, Construction, Banking etc in Stock markets and performance of these funds largely depends on performance of those sectors in Stocks but as these funds are handled and closely monitored by experts in the field so risk chances are less. There are above 1000 of MFs are available today and choosing one is tedious job. Here is a little exercise which can ease your job :-

• First of all you should carefully decide your financial objectives. How much returns you are expecting and how much risk you are willing to take ? Are you looking only for tax benefits ?
• Match each goal with appropriate MF category and diversify your investments. For example you should plan your investments with respect to growth, balanced or secured MFs.
• Look for diversification of investments and building a portfolio of 3 - 4 MFs.
• Keep an eye on your investments, have patience and review the performance of your MF portfolio.
• You should also keep the tax aspect in mind.
• And do the research in MFs.

Read the offer document carefully and ask your agent about entry and exit load. Few MFs have entry load as high as 20 % and as low as 2.5 % and exit load also varies from 0 % to 10 %. These are hidden costs which agents rarely disclose to customers.

Some sources from where you can get knowledge of various mutual funds and thier current performance:

www.licindia.com
www.sbimf.com
www.iciciprulife.com
www.utimf.com
www.moneycontrol.com


For any queries, regarding your investments mail me at - ankurchahal@gmail.com