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HomeFinanceTips for selecting the perfect mutual fund for personal investment

Tips for selecting the perfect mutual fund for personal investment


More than 59 percent of investors in India still prioritize past performance as an important factor when investing in mutual funds. However, they tend to redeem their investments within two years despite being aware of the benefits of long-term investing and compounding. A survey conducted by Axis Mutual Fund reveals that 48.7 percent of equity investors withdraw their portfolios within two years. This is largely due to investors making the mistake of selecting funds based on short-term returns, without considering the volatility of the market.

To choose the right mutual fund, it is important to focus on your financial goals rather than where to invest. This approach ensures that investment risks are aligned with the target time horizon. Additionally, investors should select funds with a long-term track record of outperformance and high-quality fund management. While past returns, popular brands, and star ratings are factors to consider, they should not be the sole basis for decision-making.

Instead, investors should assess the fund’s performance relative to benchmark indices such as Nifty 50 or Sensex, considering returns over different time horizons. It is important to compare the performance of funds within the same category. Additionally, investors should analyze portfolio allocations, age of the fund, market capitalization, and sectors in which the mutual fund invests.

Index funds can simplify the fund selection process as they aim to mimic their underlying benchmark. Choosing a fund with minimal tracking error and a lower expense ratio can be beneficial.

Understanding personal risk appetite is crucial in selecting the right mutual fund. The mutual fund riskometer provides a representation of the risk associated with a scheme. Investors should consider their risk appetite based on their investment profile, financial goals, and needs.

Diversification within a fund’s holdings is essential to mitigate concentration risk. Checking if the portfolio is diversified across sectors and asset classes is important. Additionally, evaluating the fund’s management team and ensuring the fund manager responsible for the track record is still present is vital.

Overall, investors should focus on long-term goals, assess performance relative to benchmarks, consider risk appetite, diversify holdings, and evaluate fund management when choosing a mutual fund.


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