Choosing the Right Mutual Fund

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A Step by step guide to choose a right mutual fund scheme

“Models work when they are appropriate for the particular circumstance, but some of the best investment judgments over time have come when people recognized that models derived in other periods were broken or not directly relevant” – Abby Joseph Cohen

Investing in mutual funds seems interesting, with number of websites, TV and other finance and wealth magazines publishing various information.

However it is a challenging task and involves knowledge regarding the shares and securities market and various laws that govern Mutual funds is necessary before investing in them.

Understanding the principle of mutual funds; the investment of the money of a large number of investors in Stock market, bonds and money market instruments that are managed by managers makes one feel relieved.

However, it is best for you as an investor to make a right choice of the mutual fund that suits your need.

At Holistic Investment, we believe that choosing the right mutual fund is not just about chasing returns but aligning it with your overall financial and life goals.

Whether you’re looking for a mutual fund SIP investment in Chennai or exploring holistic investment strategies across India, the process begins with awareness and clarity.

Choosing right MF

Investment Objective & Time Horizon

The objective of the fund or the use to which the funds would be put to would be a vital deciding factor.

Mutual funds investing in stocks would suit those that are ready to take more risks; stocks mean more exposure to the volatile market though higher returns.

The length of time that one has to wait to get reasonable returns also plays a vital role.

So it is best to read the offer document or fund brochure carefully before making the decision.

Before investing, understand your investment horizon and financial objectives.

This helps you in choosing the right mutual fund or long-term investment plan that matches your personal goals.

A holistic investment approach ensures that your chosen scheme complements your retirement, education, and wealth-building plans.

If you’re wondering how to choose mutual funds in India, start with clarity on your time frame—short-term goals call for debt or hybrid funds, while long-term wealth creation aligns best with equity mutual funds.

How to Choose the Right Investment Plan for Your Goals?

Choosing the right investment plan is the foundation of a successful mutual fund strategy.

Every investor’s goals differ — some aim for long-term wealth creation, while others focus on short-term financial safety or tax savings.

When you’re choosing the right investment plan, always start by mapping your goals to specific mutual fund categories:

Short-term goals (1–3 years) → Opt for liquid or ultra-short-term debt funds for low volatility.
Medium-term goals (3–7 years) → Balanced or hybrid funds strike the right balance between growth and safety.
Long-term goals (7+ years) → Equity mutual funds or ELSS funds (for tax benefits) offer the highest potential returns through compounding.

A holistic investment plan doesn’t stop at choosing mutual funds — it integrates them into your larger financial roadmap.

Liquidity

In addition, whether a fund is an open-ended or close ended one points out to how liquid your investment is.

Open-ended funds are preferable to close ended ones as they can be converted to cash more easily than close ended ones that involve waiting for a period of time.

Historically open ended funds have performed better than closed ended funds.

Liquidity also determines flexibility.

When you choose a mutual fund, always assess how soon you can redeem your investments without incurring high mutual fund charges.

Diversification

It pays to check for diversification in mutual funds, for an optimum diversification makes for a good choice.

Opting for a diversification over 8 to 10 securities would be more riskier than going in for diversification of 20 to 30 stocks.

The diversification of stocks over 80 to 100 securities may mean difficulty of management to the fund manager.

In addition, making sure to ensure that there is a balanced diversification helps.

Diversification is the cornerstone of a good mutual fund investment plan.

When you choose mutual funds with well-balanced diversification, you reduce risk exposure while ensuring stable growth.

Understanding mutual fund diversification and fund of funds schemes can help you select the right MF that balances risk and reward.

At HolisticInvestment.in, we guide investors in choosing mutual funds that offer the right diversification across asset classes, ensuring that no single market event can derail your financial roadmap.

Fund Performance

After getting comfortable with the fund’s objective, it becomes equally important to know and analyze the fund’s performance.

This involves looking at the fund’s short term and long term performance and comparing it with larger market indices or benchmarks like BSE Sensex and NSE Nifty.

A higher market index over a longer period indicates better funds, however past performances in case of mutual funds can never be a guarantee of future returns and can serve only as an indicator.

Before you decide which mutual fund is best for your portfolio, study its past performance against the benchmark.

Our mutual fund goal planners in Chennai often recommend evaluating 3-year and 5-year returns along with the consistency of the fund manager’s decisions.

Using a holistic financial planning approach, you can identify which mutual fund schemes perform steadily across market cycles instead of chasing short-term highs.

Level of Risk

The level of risk involved would be another important indicator, with higher returns available only at higher risk levels.

Would you like to go for a low risk debt fund or to go for a moderate risk balanced fund or a high risk equity fund?

Look before you leap.

Every mutual fund carries a specific risk level, which is now clearly marked in mutual fund factsheets.

Assess the mutual fund risk level and see if it matches your personal comfort and financial capacity.

Understanding Mutual Fund Diversification and Risk Levels

Diversification and risk management are the twin pillars of successful mutual fund investing.

A well-diversified mutual fund spreads your investment across multiple asset classes, sectors, and even geographies — minimizing the impact of a single market downturn.

For instance:

A large-cap fund invests in stable, established companies and suits conservative investors.
A mid-cap or small-cap fund offers higher growth potential but with higher volatility.
A fund of funds scheme invests in a mix of other funds, offering built-in diversification.

When evaluating mutual fund risk levels, always check the fund factsheet.

Most AMCs classify risk under five levels — low, moderately low, moderate, moderately high, and high.

Choosing the right mutual fund means understanding this Riskometer and matching it to your tolerance level.

HolisticInvestment.in helps investors design portfolios that balance diversification with growth — ensuring that your mutual fund selection matches your comfort zone and long-term wealth goals.

Volatility & Consistency

Next, it is to be understood that any 2 funds giving the same return are not necessarily the same, as one fund could be more subject to market ups and downs than the other.

Volatile nature of funds is more a standard deviation meaning more risk involved.

In the same category of funds, an investor needs to choose funds performing consistently.

When choosing mutual funds, consistency often matters more than high returns.

Look for funds with a lower volatility score but a steady performance track record.

A consistent mutual fund can protect your portfolio during market turbulence and align with your long-term wealth creation goals.

Fund management

The management of the fund plays an important role in deciding the best mutual fund for you, with professionalism being very important.

The experience of the fund manager and the number of years he/she has been associated with the fund matters.

With a new manager and frequent turnover are not good for investors.

Fund management quality is often the deciding factor between a good and a great mutual fund.

When choosing a mutual fund, evaluate the fund manager’s track record, investment philosophy, and experience in navigating market cycles.

Charges

Things seem pleasant in mutual funds; however, the charges like entry load, exit load, administrative charges and fund management charges on an annual basis are to be carefully looked into.

It is significant to note that these charges cannot exceed 2.5% of the fund’s assets.

Most funds have uniform charges, however hidden charges need to be looked into and carefully analysed.

Understanding mutual fund charges is crucial.

There are different types of costs involved—expense ratio, fund management charges, and exit load.

A high expense ratio can eat into your long-term returns, so always compare before investing.

To conclude mutual funds may be the best investments as they can be done in small amounts as compared to other types of investment and carry a comparatively lower risk.

But your ultimate success in the form of good returns can only be assured with following these steps of smart mutual investment planning.

Choosing a right mutual fund is part of an investment plan.

To have a right investment plan, it should sync with your financial plan.

Our holistic investment approach combines mutual fund selection, tax efficiency, and retirement planning — helping you achieve true financial prosperity.

Whether you’re looking to know how to choose the right mutual fund or to understand fund of funds schemes, our Certified Financial Planners will guide you step by step toward a diversified and sustainable portfolio.

To create a sound financial plan, I strongly recommend you to take advantage of

Choosing the Right Mutual Fund

A Step by step guide to choose a right mutual fund scheme

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