How to Choose Top Performing Mutual Funds

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Oct 30, 2020

(3 min read)

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While Covid has taken a toll on the global economy, the long due sharp corrections in the equity markets were finally witnessed in March and April 2020. This was the same duration when the global bond prices witnessed steep corrections. But much relief has already come by due to the continuous fiscal stimulus provided by the major economies. The stimulus has helped maintain the desired liquidity while the continuous policy rate cuts by the central banks took care of economies from crashing.

The fiscal and monetary efforts of the governments and central banks have already helped in the recovery of 2-3rd of the total equity losses incurred in the next quarter itself. But, this achievement comes with a sharp polarisation, which means there is a widened gap between high and low valuation stocks.

In this backdrop, we see some certain signs of recovery. The long term inflation seems to be on a downhill slope only. In September, the manufacturing PMI surged to 56.8. This was the largest recovery since the month of January this year whereas the agriculture and telecom sector has remained profitable all this while.

Now, that there is a recovery in different indicators, the investor confidence has been rising for the future. In such a situation, you would want your investment to grow bigger with larger returns, The question remains how to know the top-performing mutual funds. To get your thoughts sorted about this question, you need answers to two questions beforehand. What is your risk profile and what is the time span of your investment? There are many ELS scheme tax benefits that will synchronise with your answers.

Depending upon your investment horizon, you can choose the right category of mutual funds such as equity mutual funds or debt funds. Once you arrive at a decision about which category of mutual funds to invest in, make sure you make an analysis of the following points while selecting a mutual fund.

1. Downside Protection

You need to be aware of the downside protection a mutual fund would offer. A fund is suitable to invest in when it has certain downside protection. For instance, if there is a 25% returns on a specific fund in one year, while there is a downfall of 30% in the next year. This fund does not offer downside protection.

2. Analysis of Returns

When making an assessment of the performance of the mutual fund that you are will to invest in. We recommend that instead of looking out for larger returns with more fluctuation, look out for the mutual funds that have a more consistent return graph.

3. Fund Manager

Make it a point to learn about your fund manager. A good fund manager has the potential to make low performing fund to the best performing one, and thus, increasing your returns. These fund managers decide the stocks or securities that they will divide the fund for after only in-depth research.

Information @ Finger Tips

Information @ Finger Tips

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