Mutual funds are becoming a popular choice among investors because they provide ways to get high returns and diversify their portfolios. Several companies offer different types of plans in the markets enabling investors to gain more advantages. However, those who are new to mutual funds should consider selecting the right company. Choosing a suitable fund scheme lets investors avoid risks and other problems significantly. Another thing is that it gives ways to ensure high returns. HDFC is a leading company that offers various types of mutual funds. Anyone who wants to select the best mutual funds offered by HDFC should keep certain things in mind.
7 Things to follow when selecting the best HDFC mutual funds
1. Knowing the objective
Before selecting any HDFC mutual fund schemes, investors should know their objective with more attention. Whether it is short-term or long-term investments, it is wise to determine the financial aspiration properly that will help accomplish financial goals.
2. Time horizon
Time horizon refers to the duration of a fund scheme in which investors want to invest. For instance, short-term investments are highly volatile but provide high returns. On the other hand, investors should consider investing in HDFC mutual fund plans which are more than 5 years.
3. Performance against the benchmark
A mutual fund scheme has a benchmark index that lets investors know its performance and other things. Investors who want to pick the best HDFC mutual funds should know whether the benchmark index matches the investment objective of the scheme. An example of this is that the benchmark of banking mutual fund stocks should be a banking index. Another thing is that investors should compare the performance to its active peer group. This, in turn, gives ways to know more about funds in detail.
4. Risk tolerance
Risk tolerance is an important factor to mind when buying mutual funds offered by HDFC that helps to avoid losses. Mutual funds have 5 risk levels such as low, moderate, high, moderately low, and moderately high. A good mutual fund should generate the best returns consistency over a period. Hence, investors should evaluate their risk levels before investing in mutual funds.
5. AMC track record
When investing in mutual fund plans, investors should check the AMC track records that will help make an informed decision. Furthermore, they provide ways to select the best mutual funds offered by HDFC. Tracking AMC records enable investors to achieve their financial goals with high success rates.
6. AUM
Assets Under Management, shortly known as AUM, refers to the value of assets under its management. HDFC balanced advantage fund such as small-cap funds that are having a large AUM makes it hard for investors to enter and exit companies. However, a larger size of AUM is suitable for liquid and short-term funds.
7. Expenses
When selecting HDFC mutual fund plans, investors should know the expenses in detail. This is because they will charge some amount for distribution, management, promotion, administration, and other things. Hence, one should evaluate them properly which help avoid high expenses.