Things to Check before Investing in a Mutual Fund

We know that Mutual funds are one of the smart ways to invest and grow your money. You all have heard of “Mutual Funds Sahi Hai” However, how to choose the best-suited mutual fund? Or Apna Sahi Mutual Fund?

Let’s understand through this blog!

As we are talking about mutual funds, some questions might be popping up in your mind like ‘How to invest’ ‘Which scheme is better’, ‘How to analyse mutual funds?’ or ‘What to check before investing in mutual funds?’ Here are a few things we should focus on before making the ultimate decision to invest.

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 –  Srishti 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.

What to check before investing in mutual funds?

Investment Goals & Time Horizon

Before making any investment decisions, women should first check in with themselves and understand what their goals are such as (child’s education, retirement, buying a house, etc.) and their time horizon i.e. for how many years they want to invest like ultra-short term (1-12 months), short term (1-3 years) and long term (3+ years)

You can check out Lxme’s time and goal-based portfolios which are diversified, well-researched, and curated by experts.

Risk Appetite

Investors should evaluate how much risk they are willing to take on their investments. On the basis of your risk appetite, you can choose from different fund categories.

For instance – If you have a high-risk appetite and long-term goal then, you can allocate a large chunk of your investments to equity mutual funds and rest in debt and gold mutual funds.

However, one should always diversify their investment portfolio against different asset classes such as equity, debt, gold, and fixed-income instruments through which you can manage your risk and optimise your returns.

How do you want to invest?

 There are 2 ways of investing in mutual funds such as SIP and Lump sum. A Systematic Investment Plan (SIP) is a disciplined way of investing where you can invest periodically. While, if you want to invest in one go, then you can invest through Lump sum.

Are you looking for any tax benefits?

Before investing one should first assess whether you are looking for tax benefits or not. If yes, then you can look out for the Equity Linked Savings Scheme (ELSS) where you can get tax benefits under section 80C up to the limit of Rs. 1.5 lakh.

Performance of Fund & AMC

While selecting a mutual fund scheme, checking the performance and track record of a fund or Asset Management Company (AMC) i.e. Mutual Fund House is important i.e. whether it is consistently performing well or not, etc. You can also do a comparison of how it has performed against its peers.

Costs Involved

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, and exit load is a charge levied at the time of mutual fund redemption if the investor redeems before the specified period of investment in the scheme. All the charges vary from fund to fund.

Fund Manager’s Experience

Something else to consider before selecting a scheme is the experience of the Fund Manager. You should check how long he/she has been managing the fund, the performance of the fund under him/her as well as the performance of other funds managed by him/her in the past.

Is this overwhelming? Don’t worry, Lxme has got you covered. All the hard work of selecting the best-suited mutual fund out of the 2500+ schemes available in India is done by Lxme!

Our research team spends 1400+ hours researching, analyzing, and curating the best-suited mutual fund for your financial goals.
Want to invest in your child’s education, check out the Lxme Child Education Plan!

Want to invest for your retirement? check out the Lxme Long-Term Plan. Want to start small with just Rs. 100? Then check out Lxme’s Rs. 100 Equity, Debt, and Gold Fund, and many more!! Additionally, our Research team regularly reviews and monitors the portfolios and updates the portfolios, if required.

Check out the ‘invest’  tab and explore the time and goal-based portfolios.

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