Abhibyakti Singh

Executive Assistant, LXME

How should you analyse the Mutual Fund?

What are mutual funds?

A Mutual Fund pools money from various investors and puts these funds into different assets such as equity, debt, gold, etc., depending on the specific scheme chosen by the investor. It is professionally managed and monitored by a fund manager whose goal is to generate returns for the investors.

Example – Seeta invests in LXME’s Rs. 100 Equity Fund through a SIP of Rs.100/- monthly. This allows her to diversify her money across different companies that the fund invests in with just Rs. 100.

So before investing in mutual funds, it’s important to do an evaluation of mutual fund performance and pick a suitable scheme for yourself.

How to do the same? Let’s have a look at it,

How to pick a mutual fund?

Understand your goals

A crucial first step before analysing any mutual fund is understanding your investment goals. Some questions you should ask yourself are –

What are your goals such as child education plan, emergency fund, and retirement, buying house or car? Etc. What is your time horizon i.e. for how many years you want to invest such as short term or long term?

Check the Riskometer

Different funds will have different risk levels. Every fund has a riskometer which is a graphical representation of the risk a mutual fund carries. Understand your risk tolerance and choose a fund whose risk level matches your appetite. If you taking higher level of risk then you’ll get higher returns, however, before taking risk assess your risk appetite.

Compare a fund’s performance with similar funds and benchmark index

Each and every fund has a benchmark index. As an investor, we should find a suitable benchmark and compare it to the fund we want to invest in. If a fund consistently performs better than the benchmark, then it is a good investment. Besides, you can also do a comparison of how it has performed against its peers.

Evaluate the fund’s historical performance

An indication of a good fund is its long-term performance. Evaluate the past returns generated by the fund. An ideal fund should be generating consistent good returns in the last 5-10 years rather than great returns for just one year.

Look at the expense ratio

There are some costs involved such as the expense ratio, which is the fee charged by a particular mutual fund scheme to manage the investments on behalf of the investor. The components of Expense Ratio are management fee, administrative costs, and Distribution fees. Which vary from fund to fund so need to compare this as well.

Selecting a mutual fund and conducting mutual fund performance analysis involves considering multiple factors that you need to review and monitor periodically!

Are you also worried about how to get started? Don’t worry, LXME’s got your back. Our research team does all the work for you! Right from analysing, researching for approximately 1400 hours and selecting the best-suited funds for you to create different portfolios as per goals! Investing through LXME is simple yet powerful with our expert-curated plans starting with Rs.100/-

The best part is these portfolios are reviewed and monitored on periodical basis and in case any change required, then the same is initiated to boost the portfolios and optimize the returns.

Click here to get started


Can I redeem Mutual Funds at any time?

Yes, except ELSS, you can withdraw your money in mutual funds whenever you need it.

What are the types of mutual funds?

There are several types of mutual funds available in the market. For example, based on asset class we have equity, debt, gold mutual funds etc.

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