Home Finance 7 Secret Steps-How to Select the Best Mutual Fund for High Returns.

7 Secret Steps-How to Select the Best Mutual Fund for High Returns.

explained about criteria for choosing a mutual fund.

Do you know, As per data In India, only 2% of the population invests their money in the stock market or any other equity-type of investments, and very few of them actually know how to select the best mutual fund?

Out of which more than 30% are dependent on the intermediaries like brokers and invest according to them in the market.

But in the long run, and it has given 10 to 15% returns annually as per record.

So if you want to cut down the margin of a broker and want to increase the returns.

Then here we come up with the steps to choose the best mutual fund for yourself according to your risk profile.

What is here for me.

  1. The reality of investments in India.
  2. Steps to select the best mutual fund for a high return.
  3. Conclusion.
  4. FAQ’s

The reality of investments in India.

Several times many investors invest in a mutual fund by seeing star rating of that fund on any website.

Or also by seeing only 1-2 years past returns of that fund for selecting it.

And also invests without proper analysis of that fund which in turn dependent on some other broker for investment advice.

Due to these kinds of investments, it leads to some consequences which are explained below.

So by knowing this you can now select the best investment options around you.

Impact of these unknowingly investments in mutual fund.

Due to wrong investment strategy, it could affect the asset management company in below-mentioned ways:-

As many of the investors invest by seeing only the star rating and CRISIL rating of that fund.

And do not knows the complete strategy of how to select the best mutual fund.

Therefore, it results in more cash flow in that fund and increases the burden on the fund manager.

And its ends up in forced investment in lower class investment options which leads to lower returns.

Now why mutual fund company invests those money and do not wait for right situation of buying.

Because due to Sebi’s rule which says mutual fund company cannot hold more than 5% of the money.

Therefore, due to these kinds of investments, the fund gives lower returns in the upcoming years.

And cannot outperform the benchmark index which is required for higher return in long run.

Steps to choose the best mutual fund for higher growth.

Here are the 7 important steps you need to follow to select the best mutual fund for long term.
And the results may vary individual to individual because risk appetite is different for everyone.

1.Always check at least 10 years of the past track record of that fund.

Whenever you choose a mutual fund for yourself. Check its at least a 10-year record or from inception date(starting date of that mutual fund).

For example:-In the fund mentioned below has given consistent returns of 9-10% since inception date.

So, whenever you choose a fund do not go for top funds.

But it should be in the top 20 for the particular category you are investing it.

Also, it is easier to get the returns by taking a high risk over the last 2-3 years for achieving the target.

But would it be right as you have to invest now and over the next years the same fund would take the high risk, and then maybe your money will be in danger?

2.Determine your Goal, duration, and risk.

Whenever we performed any task which is related to daily needs than we remember our goal yet when it comes to investment than a friend’s call may be enough to convince for the selection of any mutual fund.

if the above case is with you than you are on the wrong path of making investments.

Moreover, you need to ask yourself what is the end goal of doing the investment.

Goal of the investment is necessary step to select the best mutual fund.

You should decide the risk and time horizon of it so that you can invest accordingly.

The goal should be categorized as to whether it is for long term capital gains or short term gains.

For example, the long term includes retirement planning, children’s education, or short terms like buying a house or a car.

You should take risks according to the goal like more for any holiday or vacation planning. and, less risk for retirement planning, children’s education, future emergencies as it is very important for your life.

For example -You can invest or save in mid or small-cap funds for vacation planning as it is riskier.

And for safe investments like retirement or children education invest in debt or large-cap funds.

Golden rule of investing:-

“More risk means more returns and less risk means fewer returns”.

3.Examine the profile of the fund manager.

This tip from the steps of choosing the best mutual fund may be new to some of the investors and got puzzled about why they should do that for their investments.
Let’s take an example:-
Earlier in the 90s west indies team was supposed to be the best team for world cup also they have won it too.

But for now, would you consider it as a good team or ready for world cup because it all depends upon the captain and players of that team.

As it is the returns of a mutual fund that will depend on the profile of that fund manager and his ability to risk tolerance.

When the market is low or high from which he secures you fund and invests it judicially to get a better return for all the retail investors.

4.Check AUM under that fund.

First of all, AUM means that the total money that the fund managing company is having for making the investments in assets for more guide read our blog of the term related to mutual funds.

Why you need to check the AUM of that fund.

Aum of that fund determines whether it is exposed to the market or not also its chances of growth are more when is AUM lesser or vice-versa.

For example -For large-cap funds, it should be less than Rs 5000cr and for small-cap funds, it should be less than Rs 2000cr.

So, AUM can be one of the comparison factors of mutual funds as larger AUM means investors are trusting that fund and invests more in that fund

So it is one of the important step to select the best mutual fund for your portfolio.

5.Check the fund’s Expense ratio and exit load.

First of all, the Expense ratio is the charges that the fund company deducts for managing investor’s money.
And the exit is the charges fund company deducts if investors redeem its money before the specified period which is mentioned in the offer document of that fund.

For example -The fund mentioned below have an expense ratio of 1.47% with 3 years lock-in period in which investor cannot sell their units before a specified period of three years.

6.Read the offer document of that mutual fund Scheme carefully.

Several investors invest in mutual funds without reading the offer document of that fund.
also we all must have listened to the tag line of a mutual fund as

“Mutual fund investments are subject to market risks. Please read the offer document carefully before investing”.

It is required to read the offer document because it should match up with your risk profile and expectations.

In this document investor get the idea how mutual fund works and what their further investment strategies for growth.

So you should read this statement to select the best mutual fund for yourself.

7.Calculate your Risk vs reward profile.

All of us want to get rich in less time, double up money but for this, we need sky-high returns in less time or but this can’t be possible in investing.

Because, you don’t know the basics of choosing the best investment option for you, sometimes rules are needed to know before you break it.

So, You need to know your risk profile whether you want to take the risk or should play safe.

In reality, the returns and risks are directly connected to each other i.e, high return means high risk or low risk means low returns.

The risk depends upon your capability and you should calculate it before investing.
Example of how you can take a risk:-simple calculation for risk as follows

(100-Your age)%=allocate money in market-related products, which discussed in brief below.and remaining in other assets that are safe.

For Instance -Your age is 20 years. so By this rule, 80% of saved money should invest in market-based products(related to stock market) and remaining in safe assets.

“Bole toh jawani mai risk le sakte hai”

Therefore reallocate your money as per your needs and invest accordingly in the market.


Now every investor invests their money for high return and growth but it is not possible for everyone.

Because the procedure to select the best mutual fund is not easy and needs sequential steps that we have covered in the blog.

So you should look at these steps before investing in the mutual funds.

So in the blog, we did not talk about any rating or CRISIL ranking because it varies according to the website and by doing so it will not give any results.

Therefore, you need to learn how to analyze the fund and choose the best mutual fund according to your risk appetite.


1.How we can check past records of mutual funds?

A-Past record of the mutual fund can be seen on the money control website for free and you check any mutual fund on the website according to your portfolio.
Website for research:-Moneycontrol

2.How to divide our investment portfolio?

A-You as an investor should invest in debt funds if you want to take less risk like your goal is buying home or children’s education and can take more risk by investing in equity or small-cap funds if your goal is vacation planning or buying a car.

3.How AUM is one of the selection criteria for mutual funds?

A-It is one of the most important criteria because if the fund has more AUM than chances of its growth will be less or vice-versa.
so you need to take care of it and also see the cash reserves in that fund.
Also, the profile of the fund and its holdings are also important.

4.Is it important to see the risk appetite in mutual funds?

A-Obviously yes,because every investment comes with the risk associated with it and you need to clearly define it before investing.
For example:-You are investing in mutual fund and you expect 12% annual returns but it is not giving the same and trades at 6-7%.
So you should withdraw your money from it and re-invest it into some other asset because why you need to take so much risk with such low returns.

5.What is this offer document in mutual fund?

A-Offer document is provided with the mutual fund by the fund manager to use as an reference by the investor to see the objectives ,goal statement,past performance and financial information of that fund and should be matched with the risk profile of the investor.



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