What checklist should an investor have when investing in a mutual fund?

When investing in a mutual fund, it is important to keep in mind the following points:

■ Have you decided on the tenure of the investment and the goal for which it will be earmarked?

■ Is there a long-term goal such as children’s higher education or your retirement that the investment will be earmarked for? In this case, you could look at equity mutual funds for long-term wealth creation. In case of a shorter-term goal, debt mutual funds would be suitable for earning periodic accruals and minimising risk.

■ Have you identified the right fund category depending on your goal?

■ Are you looking for taxation benefits along with long-term wealth creation?

■ Have you matched your risk appetite to the fund’s risk profile?

■ Have you gone through the information document of the scheme?

■ How is the performance track record of the scheme over one, three and five years? Has it beaten its benchmarks?

■ Have you looked up the expense ratio and exit load of the scheme?

■ Are you going to invest through SIP or lump sum mode? If you choose the SIP route, would you be considering an SIP top-up?

■ Which options among growth, dividend re-investment and pay-out are you planning to choose from? If one seeks long-term wealth creation, the growth option can be considered. But, if you need regular income, you may select the dividend pay-out option.

olmdesk@outlookindia.com