There are two things that one should look for, while evaluating mutual funds. –Return and Risk. For returns look at the past performance, usually spanning over three years. The longer the period, the better because you know the fund has sustained rough times also. More than high returns, look at the consistent return factors of the mutual funds over a period of time. Past performance are obviously, not a guarantee that the fund will perform well in future, but it does give you about its ability to perform well.
Secondly risk.. While evaluating mutual funds, go through the factsheets and find out how the mutual fund is performing over a monthly basis against its benchmarks. Remember that if a fund is investing most of the money in a particular sector, can be volatile. Go for funds which have a diversified allocation in various sectors while evaluating a mutual fund. Also find out the performance of other mutual fund schemes in the same fund house to get an idea.
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