7 Questions you should ask yourself before investing in mutual funds

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Given the sheer variety and options available in mutual funds, it is recommended that you are sure-footed in your choice of fund schemes. These seven questions will add more certainty to your mutual fund selections.

Why am I investing in mutual funds?

Aggressive and often young investors prefer riskier mutual schemes that are actively managed to register faster growth. If you are a young investor, you have more time to recover from market blips. Therefore, growth can be your primary goal. Older or risk-averse investors prefer to preserve their assets and go for a more stable scheme. Yet another goal may be to generate a regular income from your mutual fund investments.

How much do I seek to earn?

If you have an investment goal, then you will also have a financial figure in mind. For instance, it could be a target of Rs 1 crore through SIP in 10 years. Or invest in a mutual fund with a short-term target of 20% appreciation for redemption. Your mutual fund contribution and period will be influenced by this financial aim.

How much can I invest?

In a lump sum mutual fund investment, you will have a specific disposable amount available. However, in the case of SIP investment in mutual funds, you will have to figure out an amount you can afford to invest after considering your monthly expenses and income. If you are investing for the long term, make sure that you select a comfortable contribution amount.

What is my investment period?

Although many mutual funds don’t have a lock-in period, it doesn’t mean that you can’t keep a target date in mind. If you want growth from an equity fund, long-term investment is preferred. But if you have specific goals like buying a home or your child’s education, the investment period should be chosen accordingly.

Which category should I invest in?

Mutual funds can be of various types, key among which are liquid funds, equity funds, and debt funds. Your choice of funds will be decided by your investment goals and duration. Short-term investment with the option of liquidity can be met with a mutual fund with low or no exit load and no lock-in period. For aggressive growth targets, a well-managed equity fund would suit better.

How good is the scheme?

The rating of the Asset Management Company and the track record of the fund manager are important in deciding how good the scheme is. Besides, the past performance of the mutual fund must be checked, as should be its investment portfolio.

What are the expenses?

Three expenses that have a direct bearing on your returns are the entry load, exit load, and expense ratio. Choose good mutual funds that also don’t charge highly on the entry, exit, and management of the scheme.


You will find relevant information on the Tata Capital Moneyfy App to guide your mutual fund selection. With a Moneyfy App profile, you can put your best foot forward when it comes to investing in mutual funds.

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