Once you select a particular fund in which you would like to invest, there are certain checklists that can be used to determine the strength and performance of that selected fund. Our research team has put together five imperative checklists. While selecting a mutual fund to invest in, whether it is an equity fund or a debt fund it is highly advised to gauge its past performance and analyse various ratios before making an informed decision. Hence, the investment checklist comes in handy and is also user friendly to help your investing journey easier. 

1. Returns - Net Asset Value indicates a fund's unit-value and is based on the current prices of the stocks/assets in the fund. Return over a period is calculated as the difference in sale date NAV and purchase date NAV upon purchase date NAV and converted to a percentage. 

2. Expense Ratio - AMCs charge the investors an expense ratio to cover the fund’s operating expenses, which is expressed as a percentage of the fund’s average net assets. This directly reduces the fund’s returns to its shareholders, and, therefore, the value of the investment. Lower is always better. 

3. Return vs FD Rates - Fixed Deposit rate is a virtually risk-free rate where the investor assumes almost no risk on their investment. If the fund's return is lower than this rate, investors are better off investing the amount in a Fixed Deposit. This is an important criterion that helps in making a sound investment decision.

4.Red Flags - 

  • For Equity - ASM and GSM lists are measures to safeguard investors against volatility and unjustified stock prices. Pledging holdings means taking loans against held promoter shares. Credit ratings indicate the quality of the debt instruments. Funds having stocks in ASM/GSM list, with high pledged promoter holding and debt instruments with low ratings should be handled with caution. Unsolicited tips are sometimes circulated to manipulate the market.  

  • For Debt -  Red flags for debt funds is based on credit ratings.