Is there any substitute for the best? If given an option of choosing between a star rated product and an average product, what will you opt? Obviously, everyone will like to choose the best. Compromising on quality will save money for once but can cast an adverse effect over long-term. Therefore, one should always keep in mind the long-term effects along with other factors.
In the same way, selecting the top mutual funds for your investment will surely take your investment to new heights. Opting for a scheme which is not a good performer can result in decreased return and in extreme cases, loss of principal amount also. But then again a major question arises here is that how can one determine which fund is in the list of top ranking schemes?
The performance of the funds is measured through the rating provided by CRISIL (Credit Rating Information Services of India Limited). The score varies on a monthly or quarterly basis. But, the rating cannot serve as a benchmark to identify any fund as a top performing mutual funds. There are other factors involved; the major one is the past performance of the fund. CRISIL has very strict norms that have to be properly followed by all the schemes to get ranked by the agency. The fund needs to produce a performance record of past three years to the agency which should be according to the standard of the industry.
Selection Criteria of a Top Mutual Fund
Some of the Top performing Scheme under various categories
In the same way, selecting the top mutual funds for your investment will surely take your investment to new heights. Opting for a scheme which is not a good performer can result in decreased return and in extreme cases, loss of principal amount also. But then again a major question arises here is that how can one determine which fund is in the list of top ranking schemes?
The performance of the funds is measured through the rating provided by CRISIL (Credit Rating Information Services of India Limited). The score varies on a monthly or quarterly basis. But, the rating cannot serve as a benchmark to identify any fund as a top performing mutual funds. There are other factors involved; the major one is the past performance of the fund. CRISIL has very strict norms that have to be properly followed by all the schemes to get ranked by the agency. The fund needs to produce a performance record of past three years to the agency which should be according to the standard of the industry.
Selection Criteria of a Top Mutual Fund
Other than the rating aspect various other reasons make any scheme stand in line with the plans at the crest. They are as follows
- Past performance of the fund: The previous performance of the mutual fund should be the best in comparison to the other funds in its category. Whether regarding AUM, a number of clients and the rate at which it can serve the returns to its clients. It should follow continuity in its operations and have regular investments by the clients.
- Consistency: Any fund to be ranked among the top fund should be able to show a consistent graph of performance. Monitoring the past performance does not mean that the fund performs well for the first year and starts showing downfall from the second year. A consistent growth pattern should be followed.
- Fund Managers: The fund managers are the ones who maintain the portfolio of the clients. If the fund manager is experienced and well-versed with the market conditions, then he will prove to be a boon for the scheme and AMC altogether. Hence, any scheme having a proficient fund manager will always be the preferred scheme for investment by the clients.
- Assets Under Management (AUM): The assets that are managed under a particular scheme also decides its fate. As the AUM of any scheme rises it shows the progress graph for it. The rising AUM is enough to state the popularity of the plan and is very much essential to make it stand in the limelight easily. AUM depends on the category to which the fund belongs.
- History of Asset Management Company (AMC): AMC is the company which provides the various mutual funds, for example, SBI mutual fund, UTI mutual fund. The origin and the tenure for which it is operational decides the trust that the clients will have in the schemes. Let us take the example of UTI mutual fund. It is the first financial sector company of India. Thus, it has a reach to wider section as compared to any novice company like DSP BlcakRock mutual fund. So, a well-established AMC has greater chances of reaching the pinnacle as compared to a newbie AMC.
Some of the Top performing Scheme under various categories
The top funds are selected on the basis of different categories which the mutual fund industry provides. They are:
- Equity funds: Equity schemes are the type of mutual funds which are based on providing capital appreciation having a high risk factor. The clients who can afford to take the risk are the prime targets of the AMCs. Therefore, one can observe the list of top performing funds which are ranked high on the scale of performance by CRISIL. There are various sub-categories like Large Cap, Small Cap and Mid Cap in equity funds.
- Debt funds: A category of funds which extend the benefit of fixed income generation for the clients. This means that the scheme ranks low on the risk meter and the priority list of the risk-averse customers. They are ready to sacrifice the returns but are not willing to compromise the security of their money. There are many types of debt funds like debt long term, debt short term, gilt funds, etc.
- Hybrid Fund: The category of funds which invests in equity and debt funds equally. Hybrid funds provide the facility of capital appreciation as well as security in their investment by maintaining a balance between both. The client can enjoy the sweetness of debt funds and the sourness of equity funds in one single scheme.
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