9 tips on how to select a fund

 
photo by seven_null7

1. Don’t just blindly buy what the financial advisor sells you. See if the stocks the suggested fund invests in are relevant and missing from your portfolio.

2. When a scheme’s return have run up too fast, it’s time to exit and not enter a scheme.

3. You don’t have to invest in a hot-selling fund just because a colleague is investing in it. Maybe it’s too hot to handle.

4. Evaluate your portfolio once a year and see if alterations are needed. At the same time, don’t exit the very instance the fund delivers a negative return. Give the investment some time to grow.

5. When a scheme is being merged into another, evaluate whether the new scheme is worth moving into. You may or may not be comfortable with the altered investment objectives. Compare their expense ratios.

6. The risk in equity diversified schemes is lower than that in sector specfic schemes such as telecom, pharma, infrastructure, automobiles etc. If you are a first time investor, it is always easier to start with an equity diversified fund, which spreads investments across all sectors.

7. If you are planning to invest in a scheme, a variant of which you alreay have parked your money in with a seperate fund house, see if there are any other values the fund or its manager provides for having the same kind of fund in your portfolio.

8. When the index levels are down, like they were a few months ago, index funds, where your money grows as the index values move higher, may be a good option.

9. Think of the liquidity. Ask if you can exit the investment in case of an emergency without incurring higher costs.

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