How to choose a good mutual fund?
In India the competition among funds are very high. One of the best indicators is to check its total returns. Obviously, if a mutual fund is giving you a good total return, it is one that has proved itself to be valuable to you.
Total return includes all -dividends, capital gains, interest, etc. It is expressed as a percentage of the original net asset value.
Evaluate its past performance
It has been an accepted fact that the best way to choose a fund is to evaluate its past performance. This is one of the integral characteristics of a successful investor. By tracking how profitable a fund has been, you will gain a feel for the fund. Like stocks, mutual funds have their own “personality.” Understanding this personality will help even the novice investor make decisions that are more intuitive and well-informed.
There is the commonly held belief by many investors that certain funds do better or worse than others because they briefly outperform or underperform the averages. This is thought to be only temporary. In the end, funds are supposed to revert back to the normal middle ground.
If one looks at the performance of funds over time, it is true that most funds do become average performers.
Look for the some of the following indications to choose a fund:
The fund has outperformed similar funds.
Over the years the fund has made huge profits.
The fund consistently has made a profit.
The fund has outperformed some of the major indexes (SENSEX, NIFTY)
The above indications may appear to be common sense, but you will be noticing that how many investors does follow this.
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