How to

How to Choose the Right Mutual Funds Using an Investment App?

How to Choose the Right Mutual Funds Using an Investment App?

Mutual funds pool funds from different investors and invest them in different options like bonds, stocks, futures, and more. If you are a beginner, it can be hard to choose the right mutual funds in India to invest in from multiple schemes available. This guide will help you choose the right mutual funds for your investment portfolio. 


Factors to Consider when Choosing Mutual Funds to Invest 

The following factors can help you choose the right mutual funds in India using an investment app with ease and convenience.

1. Financial Goals

First of all, you must consider your financial goals and the timeframe required to achieve them. Different mutual funds have varying objectives so your choice should match your risk profile and goals. For example,  to save tax, you can go with an ELSS fund or to save for retirement, you can go for a hybrid or large-cap fund,  and so on. 

2. Risk Tolerance Level

Your risk tolerance level plays a big role in choosing the best mutual funds. It is a volatile market and the prices keep changing frequently. Decide on how much risk you are willing to take. Do not go beyond what you cannot afford to lose in the long run. This matters a lot if you have a longer investment horizon.  

3. Check Expense Ratio

You should always check the expense ratio of a mutual fund before you invest in it. It is the fee charged annually by the fund to manage your investment. This includes distribution fees, management fees, fund managers, etc. Go for a mutual fund with a low expense ratio so that your net returns don’t reduce much. Even a minor 0.10% difference can impact your returns. Thus, always consider this.  

However, you should not compromise on the suitability and performance of a fund just to get a lower expense ratio.

4. Mutual Fund Performance

One of the most important things to consider when choosing a mutual fund is its past performance. Check how a mutual fund has performed over a period and offered returns, along with the risks associated. You can compare different mutual funds based on these metrics and choose the one that suits your investment strategy the most. 

5. Exit Load

Exit load is the fee for selling your units of a mutual fund and it lowers the net profits you can earn. Therefore, you should always consider the exit load before investing in a fund. However, exit load is applied for a limited period such as a year. So, either you should stay invested for the long term or choose a fund that has a minimal or no exit load. Also, consider mutual funds that don’t have a very long lock-in duration for higher liquidity.

The Bottom Line

In this article, we discussed the best tips and strategies to choose the right mutual funds using an investment app. If you are new to this, make sure to start small and build your portfolio gradually. Consider your risk appetite and develop your investment strategy based on it. To begin investing online, download the Dhan app and stay updated with the latest news.

Post Comment