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Mutual funds have become a good investment medium among small investors. After the pandemic, the number of investors investing in it has increased. Today crores of investors are investing in mutual funds through SIP. The huge benefits available in mutual fund schemes continue to attract investors. However, not all mutual fund schemes provide great investments. Some also cause harm. Therefore, it is important to know some things before investing in any mutual fund scheme. you did it right
Know the risks of the scheme
Before investing in any mutual fund scheme, know which fund it is? Mutual fund schemes fall into large cap, mid cap or small cap categories. Also know in which stocks your money is being invested. If money is invested in midcap and smallcap then the risk is higher. Choose the scheme according to your risk appetite. Investors should ensure that the fund manager does not allocate the scheme money to low creditworthy instruments.
Know expense ratios and other charges
Select four or five funds from the segment of your choice such as midcap, large-cap, debt or hybrid and then compare the expense ratios of the funds. Apart from this, if you withdraw funds, then how much commission does the fund house charge you at the time of lump sum sale.
View past performance of the fund
The past performance of any mutual fund is not a guarantee that the fund will perform well in the future. By looking at the track record of the fund you can definitely compare its record with other schemes. For example, a fund that has outperformed the index year-to-date may be a better bet.
Choose an experienced fund manager
One criterion for choosing a fund is to know who is managing the fund. Investors generally place bets on funds that are managed by fund managers who have previously demonstrated the ability to manage investors' money during market fluctuations and have shown discipline even during turbulent markets. This becomes very important for actively managed funds.
Funding should be reviewed
As an investor, you must be clear about your financial goals. Always think about choosing a fund that will help you achieve your goals. For example, if the money is to be invested for a long period then one should avoid investing in debt funds. Similarly, in the short term, let's say you have to make payments in the next three years, there is no point in taking equity funds as they can be very risky. If you want to create a fund by investing for a long term, then you can invest in equity funds through SIP.