Mutual Fund Rating How To Interpret And Use Them

Slowly and steadily, mutual funds are becoming the preferred route of investment by individuals in India.

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The year 2018 saw the assets under management (AUMs) of domestic mutual fund companies increasing by almost 14 per cent in the first 11 months of 2018. This was primarily led by the growth in number of investors, which is estimated to have grown by 1.32 crore during the same period. The interesting part is that the retail investors have contributed in a big way in this increase. They now form more than 50% of the total AUMs of mutual fund industry.

The mutual fund industry on an average has witnessed an addition of around 10 lakh of SIP accounts every month. The monthly SIP amount has also increased from 6,222 crore to 7,985 crore at the end of November 2018. The overall folios of mutual funds have also grown by 1.25 crore to 6.7 crore.

One of the key factors on which the growth momentum of mutual fund industry hinges is the investing experience of the investors. If the experience is good, we will witness accelerated inflows; however, a bad experience will ruin this growth. The MF industry had gone through a rough phase during 2009-13 due to bad experience of the investors.

How you select MF schemes?

Therefore, selecting the right mutual fund scheme becomes crucial. Most of us do not follow a disciplined way of selecting a mutual fund. We normally invest based on gossip or rumour. Sometimes, a recommendation from our friend, or worst, trying to mimicking your friend’s portfolio is another common method of investing in MFs. The most prevalent method being investing in top rated funds. All the above ways of selecting funds might or might not work for you. However, you should understand the way MFs work that will help you to select the right funds that are suitable for you.

How Funds are rated