July 29, 2024
5 factors to consider while investing in MFs
While past returns are not indicative of future performance, it is useful to review the five-year average returns of a fund. Look for funds that have consistently outperformed the benchmark and their peers.
Fund returns
Check the expense ratio. In general, the expense ratio should be the same or lower than the peers. High fees can reduce your net returns significantly.
Expense ratio
Understanding the fund’s risk is important. Funds with higher volatility can offer higher returns but come with more risk. Ensure it matches your comfort level.
Risk metrics
Consider the size of the fund. Larger funds often have better resources and stability, while smaller funds might offer unique opportunities but can be more volatile.
Fund size
Look for funds managed by experienced managers with over 10 years in the field. Proven track records often correlate with better performance.
Manager experience
Check the fund’s investment spread. A diversified fund invests in various assets, which helps spread risk and improve potential returns.
Diversification
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