5 Key Questions That Mutual Fund Investors Should Ask

Once you identified mutual fund as your investment class, the next essential task is to select a scheme or set of schemes that can help you meet your goals. Here are a few things to consider:

Match Your Objectives

When it comes to investments, knowledge is the key. Fund performance is essential, but simply picking up last year’s top-performing funds is not the right approach because these are ever-changing set. Before arriving at a decision, it is necessary to consider a key micro and macroeconomic trends and to align your investment objectives with those of the scheme. In the case of equity investments, it is ideal to remain invested in the long term.

Charges and Fees

Every investment comes with its own set of expenses – like advisory fees, transaction cost, sales and purchase feed, and fund manager’s expenses. As per the information, one can calculate the expected return on investment. Make sure that your fund house is efficient and does not impose unreasonable charges or barriers.

Risk vs Reward

Your mutual fund scheme should have an allocation as per your risk appetite, which includes the aggressive, conservative, and assertive. Remember, if you are prepared to take more risks, the scheme should have the potential to provide better returns over the longer term.

Tax Treatment

Just like the bonds, and stocks, mutual fund tax liabilities are based on short term and long term capital gains. Moreover, as an investor, you should consider the post-tax returns while calculating the absolute returns from a scheme.

Fund Manager’s Capabilities and Investment Process

Just like any other investment, the performance of a mutual fund scheme largely depends upon the experience and expertise of the fund manager and the processes it adheres to while managing your funds. Just make sure that before handing over your hard-earned money to them, learn about their credentials and their abilities to achieve the scheme objectives even in challenging market conditions.

Also Read: How Do Mutual Fund Pension Plans Work To Build Your Retirement Corpus?