How to choose the right mutual funds for yourself? A thread🧵
There’s a surprise giveaway for you at the end make sure read the entire thread
@TickertapeIN X @FinFloww
There’s a surprise giveaway for you at the end make sure read the entire thread
@TickertapeIN X @FinFloww
How often do you invest in MFs from word of mouth or just invest in them based on their CAGR returns (or is it just every time 😂)
Let's dive in to understand the metrics one should look for while investing in MFs.
Let's dive in to understand the metrics one should look for while investing in MFs.
The basic premise of a mutual fund is that they invest in bulk in companies from the pool of money they collect from people like you and me. Of course their criteria to invest depends upon which type of mutual fund you have selected based on your risk appetite.
These mutual funds do not keep their holdings constant nor are they obliged to inform you if they change their positions. MFs report their holdings on a monthly/quarterly basis and churn their portfolio when they feel like.
Direct investing in stocks that these MFs hold does not make sense at all. You will not know when the fund manager changed the positions and allocation.
So, what does one look for?
So, what does one look for?
You look at the mutual fund manager who is taking care of all the money collected. She is the one who decides when and where to invest. You bet on her investment style when you choose a MF to invest.
However, there are some parameters you could look for in his/her investment style:
Category Returns: When a mutual fund is in a certain category (large cap, mid cap or small cap), where does it stand among its peers based on their CAGR returns. This helps to determine whether you should go with the category leader or a fund which has a potential to grow further
Expense Ratio: It is the fees that the fund charges you for managing your money. This will always impact the returns you take home. You should know that when your income compounds, the expense ratio compounds too. The lower the better.
Alpha: This is the excess return a fund manager makes above the average market return. Return on NIFTY50 or SENSEX could be a proxy for market return. So this alpha should be more than the expense ratio of the fund. Higher the alpha, the better it is.
Sharpe Ratio: This is one of the most popular metrics to look for. This tells you how much return the manager has earned after taking one unit of risk.
The premise here is if the manager is earning higher return per unit of risk he/she takes as compared to its other fund managers, then this is one you should go for.
The performance cannot be determined on an isolated basis. There has to be a comparison between funds to determine which you should go for.
Don’t worry you don’t have to calculate these ratios, you could use @TickertapeIN for it.
Above all of this, your investment goal is the first thing that you should decide and your capacity to take risk before investing in any instrument of wealth creation.
Now comes the fun part. 100 random people will get FREE Tickertape pro for 3 months if you do the following:
1. Join FinFloww app’s waitlist for early access here: FinFloww.com
2. Like and Retweet the 1st tweet of this thread
3. Follow @TickertapeIN and @FinFloww
1. Join FinFloww app’s waitlist for early access here: FinFloww.com
2. Like and Retweet the 1st tweet of this thread
3. Follow @TickertapeIN and @FinFloww
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