Ask the right question before looking out for an answer

Holistic Investment - Mutual Funds

Investors often ask ‘Which mutual fund scheme to invest?’. But there is a more basic question which should logically precede the above question. That is ‘Which Mutual Fund Company to invest with?’.

There are 43 mutual fund companies in India. Do you think it is worth to invest in all of these companies? No.

You need to shortlist good mutual fund companies first. Then you need to shortlist good mutual fund schemes from those good mutual fund companies.

This article will guide you how to select a good mutual company to invest with.

A Good Mutual Fund Company:

You need to check whether your money is in good hands before making the investment decision . To understand the mutual fund companies and shortlist the best out of them, the following parameters will be of immense help.

1) Stability of the Fund Management Team

A good mutual fund company needs to hire good fund managers and make them stay with the company for long term.

If fund managers frequently move out of the company for seeking better opportunities, then that tells us the opportunity in this particular mutual fund company is less.

2) Experience of the Fund Management Team

You want your money to be managed by experienced fund managers and not novices. Then you need to get the answers for the following questions:

  • What is the experience of the fund management team in managing different market cycles? How they have managed a bull market, bear market, recession, boom…?
  • How do they manage different asset classes? Are they good in managing large cap funds, midcap funds, multicap funds, small cap funds…?
  • Does the fund management team frequently make company visits and meetings with the industry people to have a practical and independent view points?
  • 3) Confidence of the Fund Management Team

    Often we read the interviews of the fund management team in media and in mutual fund Company’s newsletter. After reading this interview, do you get confidence about the fund management team? Do you feel happy that your money is in good hands?

    If the fund management team is confident about facing any kind of scenario in the market, then as an investor your worries will come down.

    Leadership is a matter of having people look at you and gain confidence, seeing how you react. If you’re in control, they’re in control.

    4) Stability of the Ownership

    The owners or promoters of the mutual fund company have long term outlook for their mutual fund business or do they look for opportunities to sell the business…? It is better to stay with someone who has got a long term outlook.

    When the ownership changes, the possibility of the change in fund management team, change in investment philosophy and process goes up. This brings more of uncertainty in the way the funds are managed. Therefore stability of the ownership is an important parameter in selecting the right fund house.

    5) Confidence of the Management Team

    This is entirely different from the 3rd point above. Apart from the fund management team, the other management team needs to behave in such a way that creates confidence.

    Confidence… thrives on honesty, on honor, on the sacredness of obligations, on faithful protection and on unselfish performance. Without them it cannot live.

    Does the sales team follow ethical practices? Are the advertisements from the mutual fund company is selling or misselling? How does the top management feel about their business progress?

    The answers to these questions will help you understand the confidence level of the management team.

    The above mentioned 5 parameters will guide you in investing your money with the right people. Choosing a right mutual fund company is the first step in making a right investment in mutual fund. Please make sure your first step is in the right direction. If the first step is in the right direction, then only the rest of your steps will be in the right direction.

    If you want not only to start your mutual fund investments in the right direction, you want to start all your investments on the right track and stay on the right track forever, you need to create a customized financial plan which maps all your financial goals. If you want to understand our 360 degree financial planning process, we offer