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Top Ten Mutual Fund Tips

Vikas Gupta (CHARTERED ACCOUNTANT) (16295 Points)

28 December 2010  


  1. NEVER invest in a mutual fund that charges a load. These funds are for suckers. Whoever is trying to convince you to buy them likely gets a kickback from the fund, which is why they are trying to pressure you into investing in the fund.


  1. NEVER take stock advice from someone trying to convince you buy a mutual fund with a load. This person clearly does not have your interests in mind. He is most likely just trying to line his pockets with kickbacks.


  1. Understand the fund's asset allocation. Don't invest in a "mixed" fund (one that invests in both stocks and bonds) if you only want to invest in stocks. If you want international exposure, allocate some money towards international mutual funds.


  1. Keep fees to a minimum. Obviously, you should avoid a load and 12 b-1 fees, but you also don't want to be paying management fees either. A fund with an expense ratio under 1% is particularly lovely in today's environment.


  1. Don't invest in too many mutual funds. A mutual fund gives you instant diversification. Most funds invest in hundreds of stocks. The only reason to invest in multiple mutual funds is if you want to target various types of stocks (such as domestic and international).


  1. Consider an index fund. Most mutual funds underperform the market. You can essentially buy the market with an index fund, which generally has maintenance fees of .25% or less.


  1. Keep track of the mutual fund's benchmark. Most compare mutual funds to the performance of the S&P 500, but the S&P tracks the 500 largest  US stocks. If, for example, you choose to invest in foreign small caps, then you will need to use a totally different benchmark.


  1. Do not chase funds that have just had good performance.The fund itself may have just gotten lucky or may just be targeted to an asset group that did well in the past year (for example, a health care fund when health care companies had a record year). Also, funds that have had good performance might sometimes get a huge influx of funds and not know how to invest all of these extra funds effectively, thereby detracting from future performance.


  1. If possible, invest in a smaller mutual fund. Large, ten billion dollar funds have a difficult time investing in stocks. Just 5% of a ten billion dollar fund can buy many US small cap stocks. If this fund found a $500 million company it thought was great, it could only invest a small amount of its total assets in the company without greatly affecting the price. I prefer to invest in mutual funds that have $2 billion in assets or less, especially if the fund is focused on small caps.


  1. Never pay a load. Consider an index fund. Did I say that already? Well, I'll say it again because these are the two most important points you should take away from this

Source : https://www.research-mutual-funds.net/Top_Ten_Mutual_Fund_Tips.html

 18 Replies

CS LLB Pulkit Gupta (https://www.facebook.com/pages/Life-and-Promises/553962034682487)   (16631 Points)
Replied 28 December 2010

Excellent work Saritha

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15587 Points)
Replied 29 December 2010

Very Useful Tips. Thanks

Vikash Maheshwari (learner) (6358 Points)
Replied 29 December 2010

now thats what i love.....................thnx a lot 4 sharing................

Ankur Garg (Company Secretary and Compliance Officer)   (114659 Points)
Replied 29 December 2010

Indeed Very Useful Tips for real life investment strategy.


CA. SANAT PYNE (F.C.A. & M.COM) (16757 Points)
Replied 29 December 2010

NICE ONE..............

KEEP SHARING................

CMA.Manikanta (Grad-CMA &CA-Final) (314 Points)
Replied 29 December 2010


Charu (nil) (122 Points)
Replied 29 December 2010

Thanks a lot.

I think that SEBI has now done away with Entry Load.. Plz tell/

Ashish (Student) (144 Points)
Replied 29 December 2010

hey is it a copy paste article ?


nice tips... thanks .. keep sharing

anil (article clerk) (74 Points)
Replied 29 December 2010

thahks useful tips...


good one..

patel sunil (artical) (35 Points)
Replied 29 December 2010


prateek rijwani (Industrial Trainee) (125 Points)
Replied 29 December 2010

good task.................

CMA. CS. Sanjay Gupta ("PROUD TO BE AN INDIAN")   (114102 Points)
Replied 29 December 2010

Very Nice Tips.....

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