Mutual Funds: Investing in Mutual Funds in the New Year? Have you thought about these 5 things?

Here are 5 things to keep in mind before creating a portfolio.

Experts recommend long-term investment in mutual funds. That is why high interest rates are available. Besides, it is the best way to increase wealth by losing inflation. So there are several important things to keep in mind before investing in a mutual fund. Here are 5 things to keep in mind before starting a portfolio.


1. Term: How many years are being invested, this is very important in the case of mutual funds. Jitendra Solanki, a tax expert registered with SEBI, says: The division of the fund has to be decided on his basis. For example, a small cap fund is ideal for long-term investment. If you want to invest in the medium term, you have to choose a mixed cap or mid cap fund.

2. Expenditure Ratio: After selecting the mutual fund category, the fund plan has to be chosen. The investor should know that the fund house charges an investor to manage his portfolio, this charge is called the expense ratio. SEBI-registered tax expert Jitendra Solanki says, “The average expenditure ratio of mutual funds varies from 1 per cent to 3 per cent.” According to him, “investors should invest only in those funds which have an expenditure ratio of more than 2%”.

3. NAV: Investors are advised to look at the net asset value or NAV when determining mutual funds. The lower the NAV, the higher the return. However, in addition to looking at NAV, one has to look at the history of the fund (how it has returned before) and the fund management plan.

4. Sharp Ratio: Pankaj Mathpal, MD & CEO, Optima Money Managers, says, “Sharp Ratio is used to calculate the risk and consistent returns of mutual funds. It basically tells an investor how much extra return a holding will match. The investor has the advantage if he has to choose any of the mutual fund plans which have given almost the same returns to the investors in the last few years.

5. Trainer Ratio: Jitendra Solanki says, ‘Trainer Ratio refers to how risky a mutual fund is in the market and how much profit can be made by investing in it. Since mutual fund investments are subject to market risk, trainer ratios must be considered when comparing plans. It’s a must have, for any Affiliate, promoting any program.

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