I am asked this question in every session that I conduct. You’d think this is an easy question to answer. No, it’s not that simple. There is no one size that fits all solution to this question. Each one of us have a different requirement. To answer this question, first we need to understand why you want to invest. What do you want your investment product to do. When do you want this money? How long will you stay invested in it. Is the investment meant for short term or a long-term goal, based on this, we need to decide how much risk you should take. And Last, then we can decide on the appropriate investment product. And if it is Mutual fund, should it be Debt or Equity or mix, then comes the answer to your question as to which is the best Mutual Fund to invest in.
Most people take the short cut route and directly choose the product without understanding what it is meant for. More often than not, this choice is made based on advice given by friends and family based on their personal experience and knowledge, no doubt they are well meaning, but not necessarily qualified to give financial advice. It is important to understand that what worked for them, need not work for you and vice versa.
The first step for choosing the best mutual fund is to first decide on the destination or a goal. Much like any road journey we undertake, we first put the destination on the GPS, it then shows us the best route to take based on average speed, time, tolls, traffic etc. The drive becomes familiar since you can see the route, you are mentally prepared for what’s coming our way, so the journey seems pleasant. Same goes for the investments too, further this familiarity governs our behavior too which in turn determines if the mutual fund is best for you or no.
The best mutual is the one that helps you in
- Meeting your financial goal timeline
- Managing your risk,
- Achieving your goal
So here’s simple guideline that you can use for choosing your best mutual fund.
| Sr. No. | Features | Short Term Investments | Medium Term Investment | Long Term Investments |
| 1 | Time span of Investments | Usually less than 2 years | 2 – 5 years | More than 5 years |
| 2 | Objective of the investment | Capital Protection | Capital Protection + Growth | Capital Growth |
| 3. | Risk Associated | Less Risk | Moderate Risk | More risk |
| 4. | Goals for which investment is being made | Emergency Fund Fees- college, school, credit card payments, appliances, gadgets etc. | Home renovation, Holiday, | Higher Education Marriage Home Car Retirement |
| 5. | Returns | Low | Moderate | Moderate to High |
Check out the riskometer mentioned in the product label of every fund.
Remember, even after all this, there’s one more element that impacts the returns you get from the funds. And that is your behaviour. Now consider this situation, where in the fund has performed very well in the time frame set by you, but you withdrew from it before time due volatility and fear, then you can’t blame the fund for the returns you got from it.
Womoneya 
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