Chosing a Mutual Fund.

The boom in the share market has increased the number of mutual funds in the market. With so many funds it becomes a difficult choice to select the right mutual fund. Any wrong selection can make a huge difference in the returns. We should keep few things in mind before investing.
Ascertaining the risk profile.
The first step before investing in any Mutual Fund is to check our risk profile. There are various schemes in the market which carry high risk. Mostly sector funds which invest only in one particular industry like power or infrastructure offer high returns, but at the same time are very risky. The investor should always ascertain what his risk taking capacity is, high, medium or low.
Past performance
while it is clearly mentioned in the offer document that the past performance is not an indicator of the future, it does help us in selecting the fund. While checking the past performance we should have a look at the time frame of more than 3 years. There are few funds which perform in haphazard manner by giving returns inconsistently. One should also check how the funds have performed in the bull and bear markets of the immediate past? Tracking the performance in the bear market is particularly important because the true test of a portfolio is often revealed in how little it falls in a bad market.
Know your fund manager
Check the track record of other schemes managed by the same fund manager. Check out if the fund manager has changed recently. If a new fund manager has just taken up the assignment then check previously managed funds by him.
Read the Offer Document
The offer document of the scheme tells you its objectives and provides useful details like the track record of other schemes of the same fund house.
Keep an Open Eye
The revolution in print and television industry has benefited many. Why shouldn’t we take the advantage of such a revolution? There are so many financial news channels and newspapers that we can have enough knowledge about various types of funds. There are experts who give advice on how to select a good mutual fund on these channels.