Mutual Funds (MF) have emerged as one of the most sought after investment vehicles despite it being subject to market risk. Through MF, you get an opportunity to invest in shares, debt market, Government securities, overseas market and commodities market. There are various options in MF and choosing the one that suits your time horizon and risk appetite can be a daunting task. You will do a thorough research while buying an appliance or gadget, so that you get a good experience out of it. Similarly, you will have to do the same so that you get a good return out of your MF investments. Below are a few things that you can consider before investing in MFs.

1. Investment Objective – MFs have an investment objective irrespective of its category.  It is these investment objectives which decide the investment of the fund in various asset classes. It is advisable to check the investment objective of the MFs and choose the one that aligns with your financial goals.
2. Performance – Compare the performance of MFs before deciding on which one you would want to invest. Remember to compare MFs of the same category, you cannot compare apples to oranges and expect same kind of result. After the comparison, you will have a fair idea as to which MFs are performing well consistently. By now, you should also have decided the amount that you want to invest in MFs.
3. Risk Involved – Any investment will entail some amount of risk, you will have to check which MF matches your risk tolerance. You can measure the risk of a MF by checking if it is able to give you the return for the risk that you’re taking on. Based on this a Value Research Fund Rating is provided and this rating tells you how a particular MF is performing compared to similar MFs at the same risk level.
4. Fund Manager – As much time you pay attention choosing a mutual fund, spend equal amount of time researching on the fund manager. After all, you are investing your money on the fund manager’s vision and abilities; you are buying his experience and trusting that it will pay.
5. Expense Ratio – MFs are managed for a fee and the expense ratio tells you how much you will have to pay a fund house to manage your investment portfolio. This can be treated as a comparison parameter between different funds in similar category. A fund with a lower expense ratio can be one of the deciding factors between two funds with similar performance and investment strategy.

Direct Plan Vs Regular Plan – All MF schemes offer two options of investment – Direct Plan and Regular Plan. In a Direct Plan, you will invest directly with the Asset Management Company and will not have to pay any distributor, banker or broker. In a Regular Plan, you will invest through a broker or banker and will be charged a distribution fee by the AMC, which is included in the plan. Therefore Direct Plan will have a lower expense ratio when compared to Regular Plan.