Mutual fund schemes are often very attractive but how to choose the right one? Let us go through the details of how to choose the right scheme in this Indian money company review.
How to choose the right mutual fund?
- Pick a mutual fund based on risk profile
As per Indian Money review, risk profile is the ability and willingness to bear risk without any complaints. According to Indian Money company profile analysis, a conservative investor must consider large-cap funds. They generate wealth, slowly and steadily over the long term.
These are steady performers which pay regular dividends. Large-caps have performed very well over the last year, even as mid-caps and small-caps are going through a severe correction. A volatile market has forced investors to seek solace in large-cap funds.
Mid-caps and small-caps are for investors with high risk tolerance. They outperform large-caps in a bull market, but could crash in a bear market. Small-caps are for investors with high risk appetite, seeking very high returns.
- Look at expense ratio
According to indianmoney.com Bangalore, total Expense Ratio (TER) is the expenses involved in managing and operating the fund. Studies have shown that mutual funds with lower expense ratio generally outperform those with higher expense ratio.
Large-caps have lower expense ratio vis-à-vis mid-caps and small-caps, as expenses are spread over a fund of very large size. Mid-caps and small-caps have a higher expense ratio as they meet expenses over a smaller asset base.
- Invest based on time horizon
Time horizon is the time you can stay invested in a mutual fund. Invest in equity mutual funds for the long-term of at least 5-7 years. Studies have shown that 10-year returns of small-caps are higher than large-cap funds over the same period.
According to Indian Money reviews, small-caps are good performers even over a 5-year period. The trick of making money in any mutual fund is staying invested for the long-term. Invest in small-caps over large-caps and even mid-caps, if you have a time horizon of 10 years or more.