Consulting financial advisor or reading reports? What should be your criteria to pick Mutual Fund

One of the reasons which has made Mutual Funds popular is that it helps in saving tax. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C.

Before investing, the best thing is to consult a financial planner. Photo: Pixabay

Mutual Funds have been considered as one of the best investment options.

The advertisements and promotions has helped Mutual Fund industry to grow a lot over the past one decade.

One of the reasons which has made it popular is that it helps in saving tax. In simple terms, you can reduce up to Rs 1,50,000 from your total taxable income through section 80C.

Speaking to Zeebiz, Ajit Narasimhan, Category Head - Savings and Investments, BankBazaar.com, said, "Tax Saving Mutual Fund scheme, also known as Equity Linked Savings Schemes or ELSS, are offered by most Asset Management Companies in India. You can use ELSS to claim tax deduction of up to Rs 1.5 lakh under Section 80C.

ALSO READ: Tax saving: Mutual Funds should be your next investment option

How you should pick mutual fund?

What is the first thing you do before investing in any mutual fund? As a layman, the first thing you do is refer the research reports and pick one of the topmost fund mentioned in the report.

Which is fine and this is why the reports are made for. Fair enough.

But, if you look at properly, all the research agencies have different criteria of calculating the performance of the mutual funds. For instance, if one agency is saying A fund has performed better, it is not necessary that for another research agency the same fund A has performed well. Maybe, for another research agency, fund B has outperformed A.

The research reports always give you information based on the past returns. But, should this be enough to know about the fund and invest money?

Explaining the criteria, Romil Singhal, Certified Financial Planner, Director, Wealth Wisdom, said, "The most important criteria should be: 1. How much time can he (investor) spend in the market 2. For what goal is the savings planned 3. How much risk he can take while investing."

Before investing, the best thing is to consult a financial planner. All the investing medium involves a "risk" factor. A financial planner or an expert will help you in minimizing the risks.

"Consulting a Financial Planner is important since he will be able to identify the client’s problem areas and address those issues. Financial Planner will be able to tell the time when to book profits if he’s following an “Asset Allocation” strategy. Portfolio review is very important while one invests since client’s risk profile may change and all the invested schemes all the time does not perform," Singhal explained.

So, for the next time, do not just run behind the reports. Always consult your financial advisor to get best returns.

TAGS: