Investing in mutual funds through a Systematic Investment Plan is one of the most popular methods of long term wealth creation. Investing small amounts regularly has made SIPs accessible to all, from beginners to seasoned investors. However, choosing the right mutual fund is an important decision for your investments. In today’s digital age, mutual fund calculators and performance data play an essential role in helping you make an informed decision. If you are interested in exploring MF online options, it is very important to assess these tools before investing in any investment. Today, we will guide you through how to choose the right mutual fund for SIP, using the power of calculators and performance data.
- Understand Your Investment Goals
Before selecting any mutual funds for your SIP, it’s essential to have a clear understanding of your investment goals. Are you looking to save for retirement, your child’s education, or perhaps for a big purchase? The target that you have set in terms of returns will determine the nature of the mutual fund. In case you want to save for long term objectives, equity mutual funds will probably be a better fit in view of their likely superior yields. In case the requirement is a short term goal, the more prudent strategy could be debt funds or even hybrid funds.
- Use SIP Calculators to Plan Your Investment
One of the most effective ways to decide how much to invest in a mutual fundthrough an SIP is by using SIP calculatorsavailable on various mutual fundwebsites or IPO apps. They help estimate returns on investment based on historical data and expected growth rates.
For example, by plugging in the amount you put into your SIP every month, investment period, and the expected rate of return, one can have an idea about how much wealth will be accrued over time. More money or longer horizon generally results in greater returns as compounding powers the same.
You can also compare different mutual funds using the SIP calculator based on their projected returns. For example, while using an IPO app to explore new funds postIPO launch, the app may also give you an estimate of potential returns, which will help you in making a decision that fits your goals.
- Analyze Fund Performance Data
When you are choosing a mutual fund for your SIP, performance data is very important. Historical performance will give you an idea of how a fund has performed in different market conditions. Past performance does not guarantee future results, but it gives you an idea of the fund manager’s ability to navigate through market fluctuations.
Hence, this is what you should look for in the performance data:
- Consistent Returns: One should find funds that have delivered consistent returns over the long term. If a fund has a history of beating its benchmark index consistently, then it is likely to be good.
- RiskAdjusted Returns: Pay attention to the risk adjusted returns which give you a clearer picture about how the fund performs in relation to the risk taken.
- Volatility: A fund with high volatility may be more likely to generate better returns, but at the cost of higher risk. If you are averse to risk, then funds with lower volatility may be your best bet.
- Compare Different Mutual Funds
After collecting data from SIP calculators and analyzing the performance of various mutual funds, it’s time to compare your options. There are several types of mutual funds, and it’s important to compare them based on the following factors:
Expense Ratio: A lower expense ratio means more of your money is invested, and it can result in higher returns in the long run.
- Fund Size: Large funds may have more resources to diversify and lower risk, while small funds may offer higher growth potential but with greater risk.
- Fund Type: As can be recalled, equity, debt, and hybrid funds have differing goals. Ensure that the kind of fund you opt for serves your investment purpose.
- Exit Load: Some funds impose an exit load if you redeem your units before a specified period; this is usually 13 years. Factoring in this charge will do well in computing potential returns.
- Use an IPO App to Track New Mutual Funds
There is an introduction of new mutual funds every now and then. Many IPO apps offer early access to these funds. These help you stay ahead of the curve and identify opportunities even before they become mainstream. When a particular fund has recently gone through IPO, then there may be insights into the fund’s strategy, objectives, and prospects offered through these apps.
Keep in mind that investing in newly launched funds is riskier because their track record is limited. However, if the fund is backed by a reputable asset management company and has a clear investment strategy, it could be a good opportunity.
- Seek Strong Fund Management from the Funds
Fund management directly analyses the overall performance of a fund. Even when you are dependent on calculators of mutual funds to choose your investment and rely solely on performance data, a good fund manager is indispensable.
Some asset management companies (AMCs) have well experienced fund managers who have a good history of sound decision making, especially in times of market downturns. Use the MF online website to find details about the experience, qualification, and previous performance of the fund manager. This will assure you that the fund will do well under any market conditions.
Conclusion
The right mutual fund for your SIP entails a lot of things on the basis of goals pursued, risk appetite, or the performance of mutual fund. Using mutual fund calculators to filter performance data will help you make more meaningful decisions about where to invest.
To begin with, the various platforms such as Bajaj Finserv offer a wide variety of mutual fund investment options along with calculators and performance data that help you make the best choice.
