Strategies to select the best mutual fund schemes to maximise returns

A growing majority of Indian investors are placing their trust in mutual fund investments to fulfill a wide variety of investment goals. Data released by the Association of Mutual Funds in India (AMFI) states that SIP (systematic investment plan) mutual fund accounts stood at 8.76 crore in May 2024. Furthermore, the total amount collected through SIP accounts came to ₹20,904 crore in May 2024.

Points to consider while selecting mutual fund schemes –

Analyse if the mutual fund investment can help you meet your investment objectives: You must first note down your investment objectives and check if a particular mutual fund investment helps you achieve that objective.

• Assess your risk appetite and invest accordingly: Diversification can help you minimise the overall risk of your investment portfolio. For taking the right steps, you must assess your risk appetite before investing in any mutual fund.

• Check the liquidity offered by the fund: Certain categories of mutual funds like liquid funds offer higher liquidity than other categories, such as equity funds. You should assess your liquidity-related requirements before investing.

• Analyse the fund’s past performance: You can track a fund’s performance with respect to its benchmark index to gauge its performance in the past few years. Doing so can help you get an idea of whether the fund will help you achieve your investment objectives.

• Check the fees charged by the fund: Opting for a fund that charges a low expense ratio can help you lower your overall expenses. However, you must not select funds solely based on their expense ratios. You must also consider other factors like how the fund is taxed and its past performance.

Ways to maximise your mutual fund returns in 2024 –

1. Diversify your mutual fund investments: Diversifying your mutual fund investments across mutual fund categories like debt fund and mutual fund can help you mitigate risk and increase your wealth over time. You can also benefit from the exposure to different kinds of investment instruments by diversifying your portfolio.

2. Choose the SIP mode of investment: SIP investments offer many advantages to investors including ‘Rupee-cost averaging’. This phenomenon helps you purchase higher mutual fund units when market is low, and fewer units when the market is high. SIP investments are also extremely affordable, as they can be started with a minimum investment amount of ₹ 500 monthly.

3. Step-up your SIP contributions regularly: The nature of our investment objectives changes over time. With inflation, they become more expensive. To account for this erosive effect of inflation, you must step-up your SIP contributions by a fixed amount or percentage to earn more in the long run. You can use an online step-up SIP calculator to estimate the amount by which you must step-up your SIP contributions.

4. Choose direct mutual fund plans over regular ones: Direct mutual funds charge lower expense ratios when compared to regular mutual funds as the latter include an active involvement of a mutual fund manager.

5. Reassess your mutual fund portfolio regularly: Finally, you must reassess your mutual fund investments regularly and check if they align with your investment goals. Doing so can also help you gauge if you need to step-up your SIP contributions.

In conclusion, you must choose direct mutual funds and always opt for the SIP mode to select the best mutual fund schemes. You should also diversify your mutual fund investments and reassess your portfolio regularly to check if you need to step-up your SIP contributions.