Tuesday, August 12, 2008

What to look for in a fund?

It all depends on your risk appetite and the investment’s raison d’être

While investing in any mutual fund the most important factor to look for is the investment objective of that particular fund and how well does it tally with an individual investor’s financial g oal. Once the same is established and the fund category is selected the investor should focus on the following key elements:

Pedigree and track record of the fund house promoting the mutual fund. This is extremely critical as it would speak of the discipline culture that is followed while making investment decisions for the fund. Mutual Fund business is not only about managing investor’s money, but it also involves managing trust. Hence parentage and track record of the fund house becomes an important parameter in fund selection.

Secondly, for an already existing fund it is important to look at its long term performance, consistency and sector composition. A fund depicting a volatile performance record is avoidable as it may give astonishing returns under certain market conditions, but can fail miserably under other market conditions, not offering a safe avenue.

For a new fund, detailed understanding of the fund’s investment pattern and focus is critical. Since the new fund does not even have a track record to support it, hence investor must focus on understanding what is it that the mutal fund is offering and does a similar fund already exist in his portfolio or not.

For Complete IIPM Article, Click on IIPM Article

Source :
IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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