The concept of best mutual funds is a misconception as the best mutual fund does not exist. This is because the mutual fund which is well today does not guarantee you that it will remain the same for tomorrow, or will give good returns in the future. What is the right way to invest in a mutual fund is to find out the mutual fund which will help you to meet your investment goals or find the mutual funds which sync with your investment goals? And you can know your mutual funds to select by answering the two questions
What is the time frame you want to invest in?
How much risk you can take while investing? fore investing, there is always a question in mind, how you choose the fund that is suitable for your investment!!
The 3 important factors which should be considered before selecting a mutual fund are listed below!!
The Downside Protection - To start with you need to check the fund downside protection. Take for example the returns for a particular fund in the first years is about 35 percent and the returns on the second year it is 40 percent, therefore this fund is not suitable for investments as it does not have the downside protection.
The Return consistency – After downside protection, you need to check whether the fund’s returns are consistent or not. For example, while investment in a particular fund, the returns in the first years are 10 percent, in the second year it is 10.5 and in the third year, the returns are 11 percent. On the other hand, for other investment funds, the returns in the first year are 9 percent, the returns in the second year are 1 percent and the returns in the third year is 5 percent.
Therefore, in the above two mention examples, the first investment in funds is better than the other which has return consistency.
The Fund Manager – Find out who is responsible for the particular funds. A good Mutual fund manager has the ability to turn the bad fund situation to the best performing fund. A good fund manager plays a very significant role in how your mutual fund is performing and will able to decide on which stocks or securities to invest and how-to distributer the money for the mutual invested funds.
If you follow the above mention points, while selecting for the mutual funds, you will be on the right way to pick the fund suitable for you. Also, you call them the best mutual fund for you.
Instead of chasing the vision of the best mutual fund, you must find out the right investment approach towards your funds as per requirements. And if you follow the above mention points, while selecting your points, you will cover up to go with the right way of investment.