Skip to main content

What are the Factors for Selecting a Mutual Fund?

Factors for Selecting a Mutual Fund
1) Investment Objective
Investment objective refers to an investor’s financial goal which he/she aims to accomplish with the mutual fund investment. The investment objective can be any short-term or long-term financial aspiration of the investor – buying a house/car, financing children’s higher education, going on a vacation, retirement, etc.


2) Time Horizon
The time horizon refers to the period for which an investor wishes to keep his/her money invested in a mutual fund scheme. It can be either as short as 1 day or as long as more than 5 years. Different fund categories work best for different time horizons. This is because some funds invest in shorter-dated debt and others invest in longer-dated debt. Equity funds should ideally be chosen if the investment horizon is more than 5 years.

3) Risk tolerance
Risk tolerance refers to the amount of risk an investor is willing to take with his/her invested money. SEBI in 2015 made it mandatory for all mutual fund houses to display a risk meter which consists of five levels of risk associated with the invested principal amount. The five risk levels are – low, moderately low, moderate, moderately high, and high.

4) Expense ratio
This is usually considered when you invest in an inequity fund. The higher the expense ratio, the more it affects you directly. It comprises of the brokerage fees and other costs that the mutual fund houses charge from investors. Hence, you need to see if the charges are not over the top. However, some funds charge high but make it up by offering a higher NAV or better returns. So consider these also while checking the expense ratio.

 Visit- www.finoledge.com
Labels:

Comments

Post a Comment

Popular posts from this blog

Bullish vs Bearish Markets – What’s the Difference?

What is a Bull Market? A bull market is a financial market (whether it’s currencies, metals or commodities) where prices are rising or are expected to rise. General optimism, investor confidence, and expectations of continuous strong uptrends characterize a bull market. These uptrends usually last for weeks, months, or even years, but can be as short as a few days, depending on the surrounding circumstances. Predicting changing trends is sometimes difficult as trader psychology and speculator behavior can play a role. Markets become bullish generally when the economy is doing well or coming out of a previous slump. For instance, individual currencies may rise in line with a strong GDP output, or drop when unemployment figures or interest rates aren’t favorable. Supply and demand forces still govern in a bull market, so weak supply but strong demand (as in the case of commodities such as oil or natural gas) will see prices rise as more investors want to purchase the asset than ar...
Post a Comment
Read more

What is Future Trading?

1. What are Stock Futures? Stock Futures are financial contracts where the underlying asset is an individual stock. Stock Future contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. The contracts have standardized specifications like a market lot, expiry day and unit of price quotation, tick size and method of settlement. 2. How are Stock Futures priced? The theoretical price of a futures contract is the sum of the current spot price and the cost of carrying. However, the actual price of futures contract very much depends upon the demand and supply of the underlying stock. Generally, the futures prices are higher than the spot prices of the underlying stocks. Futures Price = Spot Price + Cost of carrying The cost of carrying is the interest cost of a similar position in the cash market and carried to the maturity of the futures contract less any dividend expected ...
Post a Comment
Read more

What is Currency Trading?

Currency Trading Currency trading, often referred to as foreign exchange or Forex, is the purchasing and selling of currencies in the foreign exchange marketplace, done to make profits. It is referred to as 'speculative Forex trading.' Forex trading is the largest market in the world, with nearly $2 trillion traded daily, with quick growth projections. The main factor that differentiates currency trading from other types of trading is its liquidity. How Does the Forex Work? Currency trading is usually done through brokers and market makers. Investors who trade this way depend on the brokers to place a corresponding trade on the international market. For example, the currency exchange of US dollars to Jamaican dollars is US$1 = JA$114.59, so US$2,000 can earn the investor JA$229,180, who can then in turn reinvest. Forex trading occurs when the buying and selling of one currency for another takes place at the same time. Together, the two currencies form a currenc...
Post a Comment
Read more