With close to 1000 open end mutual fund schemes, it is extremely difficult for investors to make an informed investment choice. That’s why AdviceZarooriHai when it comes to selecting right funds.
We spoke to two leading mutual fund distributors to understand how they choose right funds for their clients. Let’s take a look:
Neelesh Shah of Moneydoctor Consulting and President KAMFA, Bengaluru
We first look at past performance of funds. We usually shortlist funds that have been in existence for at least 5-7 years to assess their performance across market cycles.
Another factor that we consider for selecting funds is fund management process. We check if the fund is true to its label and follows pre-defined mandate especially in tough times. For instance, we avoid hybrid funds having high exposure to small cap stocks as hybrid funds are meant for investors with moderate risk appetite.
In addition, we look at track record of fund managers like longevity of the fund manager, how long he has been managing the funds and his performance across market cycles.
Vishal Dhawan of Plan Ahead Financial Planners, Mumbai
Before getting into fund recommendations, we first understand the needs and risk appetite of our clients.
We have a checklist for selecting appropriate funds for our clients. We give weightage to combination of factors like historical returns, consistency in performance, risk ratio measures, cost and diversification to select funds. We assign 20% weightage to each element to compare schemes across categories. Finally, we prepare a comprehensive list of the top 3 funds in each category.
Another key factor which we pay attention to is rolling returns and portfolio turnover ratio of funds. While rolling returns give better picture on fund performance especially during tough times, turnover ratio explains conviction of fund managers.
