4 Factors to Help You Identify the Best Mutual Funds for SIP

4 Factors to Help You Identify the Best Mutual Funds for SIP

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Are you looking to identify the best mutual funds for SIP? With endless options and numerous choices, are you feeling a bit overwhelmed? No worries check out this article to help find the best fund that supports you in meeting your financial objectives.

With increasing awareness of the benefits of SIP mutual funds, many first-time investors are opting for them. However, they hit a roadblock when trying to figure out the best fund to invest in. With so many fund houses, offering a rainbow of mutual funds, it’s indeed difficult to pick the right one.

Get your SIP strategy Right

Identifying the best mutual funds for SIP is crucial if you want to enjoy high returns and avoid risks. Here are a few factors that you have to consider when choosing a particular fund.

  1. Determine your Investment Goal

Ultimately, it all boils down to this. Before you start comparing and selecting funds, you have to determine the primary reason for investing in the first place.

Ask yourself these questions:

  1. Are you looking for long-term or short-term investments? (This is the investment horizon)
  2. What are your risk tolerance levels? (This is the risk profile)

If you don’t want to take risks and are looking for consistent returns, then debt oriented MFs may work out best for you. On the contrary, if you’re planning to invest for long-term and don’t mind being exposed to moderate risks then equity funds are right up your alley.

  1. Choose the Fund Type

SIPs are available for a wide variety of mutual funds. You have to identify the one that suits your risk profile and investment objectives.

Some of the major types of mutual funds are equity-based funds, debt-oriented funds, hybrid funds, open-ended schemes and close-ended schemes.

  1. Zero in on a Fund House

Once you have figured out the mutual fund type that suits you, the next step is to find the right fund house to manage your investment for you.

The performance of a fund ultimately depends on the fund house. While choosing a fund house, look beyond returns. Instead, take an in-depth look at the fund management policies of the institution; take a look at the experience and credentials of the fund manager and his team. Above all, always opt for a fund house, who has earned an excellent reputation among existing investors.

  1. Take a look at the Additional Charges

A few years back, mutual funds charged a small amount as entry fee for new investors. However, SEBI scrapped this entry load, and now investors have to pay a fee only at the time of quitting the fund. This exit load varies from one fund to another.

For instance, if a fund charges you an exit load of 1.5%, then for a Rs 100 worth investment, you get only Rs 98.5.

Apart from exit loads, fund houses also charge a fund processing fee. It is the amount you pay for the professional management of your fund.

Apart from exit loads, fund houses also charge a fund processing fee. This is the amount you pay for the professional management of your fund.

Check out these miscellaneous charges while comparing mutual funds to help you select the right one.

SIPs are undoubtedly one of the best tools for small investors to reap the benefits of equities. That said, not all mutual funds are created equal. Make sure to consider these four factors to help you find the right mutual fund that offers you the best returns.

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