3 parameters to look at before you pick your mutual fund house !

There are more than 40 mutual fund houses (AMC) in India and every investor has his own favorite mutual fund house to pick. We hear about best mutual funds on various websites, hoardings and even look at their performance on valueresearchonline and then choose them for lumpsum investment or starting our SIP.

But on what parameters do you choose these mutual fund houses (not mutual fund) ? Will you pick Birla Sunlife or DSP BlackRock ? Will you choose HDFC or SBI mutual funds? Will you pick Quantum Mutual funds or PPFAS ? Or will it be Reliance Mutual Funds or ICICI Prudential ?

how to choose mutual fund-house

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In this article I want to talk about 4 parameters which were discussed by a Financial Planner – Dinesh Jain in one of the articles comments section. I am expanding them for the benefit of readers.

3 questions to ask before choosing a great fund house

1. Is asset management the core competency and passion for fund house or just another business ?

One of the things, you can look at is – “Is Asset management just another business for the fund house to make money ?”, Or is it also their passion and core competency? Will they close down the business or sell it to some other AMC, just because the revenues are down ? What kind of message do you get when you look at the fund house advertisements or their videos on internet? Take an example of Birla Sunlife mutual funds and Quantum mutual funds, do you see any difference in the way they operate or communicate ? Which fund house do you feel is more focused on asset management ? Or look at DSP BlackRock Mutual fund and Reliance mutual fund , do you get a different kind of feel in both or same ?

The first level filtering of this parameters will clean out some fund houses from your mutual fund shopping list. Note that its up-to you to decide which fund houses you think do not pass this test. You have to do your own study on this.

2. Does Fund house focus on Quality or Quantity of funds ?

The second important parameter to look at how many funds an AMC launches and for what reasons? Now, I am not saying that the fund house should not launch new funds, but do they do it, because of the demand and opportunities in market or just to cash on the market sentiments and mood ?

There are so many fund houses, who came up with new and useless NFO’s during stock market boom, just to cash on the market sentiments and named their funds in such a fancy manner that gives a feeling that the fund is so awesome ! , but when the market was bad, and they could not handle so many funds, they merged them with their other better performing funds.

So some fund houses are really an ASSET MANAGEMENT COMPANY and some are kind of ASSET GATHERING COMPANIES which just want to launch funds and their focus is on increasing the AUM, so more charges can come to them and increase their profitability. Nothing wrong in making more profits or thinking about it, but at what cost is it done is the question? Now its up to you to decide if you want to avoid these kind of fund houses or go with them.

3. How transparent and Honest is Fund House

One of the parameters you can look at is the transparency and honesty of the fund house. Look at their website, and see what kind of disclosures they have made? Do they do what they say ! , or both are different things ? Do they do their investor education program just to sell their products and schemes or genuinely they want to help investors ?

Conclusion

Picking a right mutual fund is important, but you should also do some background check on the parent fund house also before you pick your funds. Note that these 4 parameters are just for reference and it might happen that for someone these parameters does not make sense.

Can you please share what parameter you think is important one !

75 CommentsAdd Comment

  1. Paresh

    Sir,

    Want some guidance from you, I just started mutual fund investment by monthly SIP of Rs.1000/- in SBI Blue Chip Fund DIRECT (G) for 20 yrs.. Now I want to invest in some other funds for next 10 to 20 years please guide me about my choice and suggest if any changes required.

    HDFC Balanced Fund Direct (G) : 1000/- per month
    HDFC Top 200 Fund Direct (G) : 1000/- per month
    Tata Balanced Fund Direct (G) : 1500/- per month
    Tata Ethical Fund Direct (G) : 1500/- per month
    SBI Magnum Mid Cap Fund Direct (G) : 1000/- per month
    SBI Magnum Global Fund Direct (G) : 1000/- per month
    ICICI Prudential Value Discovery Fund Direct (G) : 1000/- per month
    SBI Magnum Balanced Fund Direct (G) : 500/- per month

    Waiting for your reply, Thanks

  2. Anilloka

    Hi Manish,

    I have 2 queries

    1. Selecting 4-5 mutual funds from same category is good practice or Different categories? I mean Do i need to select all 4 Mutual funds from Large Cap Equity Mutual Funds or Diversified Equity Mutual Funds or Hybrid( Balanced) Equity Funds? Can i pick 2 from Diversified or 2 from Balanced? I have done some research,from the last 5 yrs Diversified and Balanced funds are doing better than large cap funds. I’m ready bare some risk,

    2. Planning to SIP 3-4K every month? for this amount can i get tax exemption under 80C for the coming financial year? Or Only tax saving funds only eligible under 80C?

    Please suggest!

    • Anilloka

      3. Also Selecting Mutual funds from same sector is good ? or Different sector?
      Like Selecting all from banking or 2 are from banking or 2 are from Different sector?
      Example 2 from HDFC/ICICI and 2 from franklin inida or Birla Sunlife?

  3. Murali

    Hi Manish,

    I’m 28, can spare 10K per month due to my nature of job I am not able to monitor my funds closely (can try to monitor once per 2 months max)

    I have PPF and depositing as per the limit

    So Could you Kindly suggest some good Mutual funds for my retirement?

  4. Prashant

    Hi Manish,

    I am a father of a 1 month boy and want to plan for his education from now itself, m planning to invest 2 to 3k every month for 18 years period. could you please suggest a good SIP plan for me.

  5. kahnu

    Hi Manish,

    My port folio is

    Franklin India PRIMA PLUS GROWTH 2000 INR PM

    UTI OPPORTUNITIES FUND GROWTH 2000 INR PM

    ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND – REGULAR PLAN – GROWTH 2000 INR PM

    Franklin India BLUECHIP FUND GROWTH 3000 INR PM

    HDFC TOP 200 FUND – GROWTH PLAN 6000 INR PM

    is it okay or I need to change any allocation.

    Thanks in advance
    Kahnu

  6. Sibsankar Pahari

    I am 31 year old guy looking to invest my spare money .Due to my job constraints I can not keep a regular eye on the market.
    By reading multiple articles on your site I think the best option for me is to do SIP in some Mutual Fund.
    Can you suggest me some strategy or some good mutual funds where I can invest.

    Thanks in advance

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