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How Should You Select Your First Mutual Fund Scheme?


As with other first things in your life, your first investment in mutual fund will either make or break your belief in it and hence you need to very careful before making the final call.

 How Should You Select Your First Mutual Fund Scheme?

In general as a rule, your first selected mutual fund scheme should be having the following attributes to make you handsome gains.

Also read, Beginners guide to mutual fund investing.

For beginners at best what you can do with your funds is put it in a equity fund as at this time you mainly have investments in bank deposits and other fixed income instrument. For higher gains and as you have a longer-term horizon when beginning to invest in your early years, equity is the best long-term investment option and to invest in it through the mutual fund route is the hassle free and safest bet.

Also, in respect of other benefits such as those related to taxation, you need to first consider the long-tenure balanced funds that provide superior returns due to regular asset allocation attribute for which investor needs to book profits on an ongoing basis to maintain equity and debt ratio close to 65:35 as the required benchmark is, for the scheme to qualify as the equity oriented scheme to take tax advantage.

So, with the tax advantage when it comes to the debt component of the balanced funds plus the superior returns of over 15% which have been fetched by these funds in last one year, these can be good investment options for first time equity investors who cant take in huge price crashes in their valuation but are certainly not risk free.

Furthermore, as a novice investor, you can consider investing in few of the balanced fund schemes which have been rolled out in recent time with lesser volatility exposure. So together with growth, you can expect safety from your investment in balanced funds scheme


Also, as they provide more safety as against pure equity funds being less prone to falls when the market downtrends, so prove to be a better option for beginners.

ELSS or tax-saving mutual fund scheme- Taxation benefit like with the balanced funds is also offered by ELSS scheme which provide for tax exemption u/s 80C. As per Union Budget 2017, an investor can invest a maximum of Rs. 1.5 lakh in a financial year and claim exemption under this section. And an investor should remain in these funds for a long term say minimum three years which is a lock-in period for these funds. So, with the tax break you can reap reasonable returns from the instrument.

Story first published: Monday, August 14, 2017, 14:10 [IST]
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