We all have life goals and financial targets that we strive to meet by investing our savings in the best financial instruments. But, with plenty to choose from, picking the one that suits you best can be a challenge.

Mutual funds have gained immense popularity among investors thanks to ease of investing, accessibility, and good returns. It also caters to every investor’s needs regardless of the quantum of funds available to invest.

Systematic Investment Plan (SIP) is a mode of investing in mutual funds. It allows investors to put in a small amount at a predetermined interval (weekly, fortnightly, or monthly) in their preferred fund.

Here are a few factors that will help you choose the right fund.

Fund rating

Mutual fund rating is a composite measure of return and risk based on the risk-adjusted past performance of the fund compared with other funds in the same category. This gives you an idea of the ability of the fund to give returns for a certain level of risk.

Historical returns

Historical returns indicate likely returns in the future. This is to be used only as an estimate in tandem with other factors, and not as a definitive benchmark.

Age and AUM

The older the fund, the better. Any fund that is more than three years old, is a good bet. Along with age, consider the quantum of assets under management (AUM), which is the total market value of investments that the asset management entity manages on behalf of its investors. This will help you assess the success of the fund and its management company.

Expense ratio and exit load

You must also consider the expenses that you will incur in purchasing the fund. The expense ratio refers to the management and administrative fee you will bear to purchase the fund. In the same way, if you exit the fund before a predefined time, you will be charged a fee, known as the exit load.

Fund house

The fund house is a crucial element to consider. The fund house or the asset management company (AMC) with years of experience and a good reputation is more likely to give you smarter investment options and better returns. Take into account the AMC’s age, AUM, schemes and funds on offer and the charges before picking your fund.

Fund manager

Your fund manager is primarily responsible for the success of your investment. The fund manager makes investment decisions and manages the fund overall. Check the fund manager’s credentials, history and schemes managed. Also assess if the fund manager’s investment style is in line with your risk appetite.

Investment process 

Verify the investment process that the AMC follows. It should be trustworthy and not solely dependent on the fund manager. The process will also help you ascertain if the AMC is in sync with your investment style and vision.

Review and rebalance 

Your financial needs are dynamic and will keep changing over the course of your life. Your investment must be constantly monitored to verify it remains aligned with your goals. Review your goals periodically. Make changes to rebalance the investments to bring those in line with your revised goals. This is a critical step to ensure financial independence.

Now that you are aware of these factors, venture into the market and start investing. To be sure, you can also seek the help of a financial advisor who can guide you on making the most of mutual funds via the SIP route. Let your advisor help you work towards your goals of wealth building, wealth management, children’s education, retirement planning, estate planning, and more.

Looking for an advisor near you? Get in touch with our advisors across India and in other countries.