Two patients with the same bodily affliction may require different medicines. Similarly, two different investors may not gain the same benefit from a particular mutual fund scheme. Selecting the right MF scheme is a lot like selecting a life partner – the two must have similar pursuits for life to walk together. If you’re wondering how to choose the right MF scheme to invest in 2021, then this guide will help you.

 #1 Consider your investment objective

The very first thing to consider is your personal investment objective since it will be closely linked to the investment objective of your funds. Based on your short-term and long-term goals, you need to choose an MF scheme – the degree of risk involved and the return on the investment will depend upon the investment objective, so choose wisely.

 #2 Know your risk appetite

The next thing to consider before investing in mutual funds India is to have a clear idea of your risk appetite. Is your financial pool large enough to allow you to take high risks, or do you need to play it safe to minimise your risk chances? If you chose the former, you can invest in highly volatile funds, but in case you’re in your 20s without dependents and need to take the safe route, your best bet is to invest in stable funds that can generate sustainable returns.

 #3 Know the AUM and your AMC

AUM is short for Assets under Management, and AMC is short for Asset Management Company; both need to be considered before investing in a mutual fund scheme. AUM refers to the sum total of assets in which different investors have chosen to invest in. Since this metric shows investors' overall confidence in a particular fund, gauging it will help you choose funds across several categories.

Assessing the performance and experience of different Asset Management Companies will help you choose the right one – you can rest assured that your investments are in safe hands.

 #4 Keep track of the total expense ratio

Investment in an SIP comes attached with other expenses – operation and administration charges and the manager's fees collectively known as the expense ratio. Typically, the standard expense ratio will range between 2 to 2.25%, so keep that also in mind before you invest in a particular MF scheme.

#5 Know the performance rankings of different funds

Normally, MFs are ranked for their performance based on different factors. Only a few trusted agencies such as the CRISIL and Value Research rank various funds correctly. So, make sure you do your homework well; go through these agencies' rankings to determine the time your funds can remain parked in a particular scheme. You must also compare your chosen funds with their counterparts from the same category – sector-specific such as healthcare or banking and finance or other categories such as large-cap, ELSS, etc.

So, go through each factor before zeroing-in and investing in mutual funds online. You can make an assessment even from the comfort of your home with the help of investment apps like Tata Capital Moneyfy App that give you access to different modes of investment based on your essential requirements, risk appetite, and time horizon. Investing in MFs is a profitable venture, given you prepare yourself and start out right.

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