Factors to consider while comparing Mutual Funds

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Factors to consider while comparing Mutual Funds
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A mutual fund investment is great for every
portfolio. This investment tool helps an
individual build their wealth and reap maximum
returns. However, not all mutual funds are the
same. Here, we bring you important factors to
consider when comparing mutual funds.
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Time period of Investment

• Every mutual fund investment may have a different
  time period. While comparing mutual funds be sure
  to check the time period and lock-in period if
  any. Always compare funds with the same time
  period for maximum effectiveness.

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Benchmark returns

• This return amount is a comparison of what the
  mutual fund investment should have earned and
  what it has earned in reality. When comparing
  mutual funds, be sure to check the benchmark
  returns to understand how effectively it is
  performing.

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Market dynamics

• An important factor when comparing mutual funds
  is the market dynamic. For instance, an equity
  fund in a bullish market is sure to outperform an
  equity mutual fund investment in a bearish
  market, irrespective of the type of stocks or
  fund manager.

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Type of fund

• Always compare two same type of funds for clarity
  i.e. equity fund with an equity fund. Do not
  compare a diversified fund with an industry fund
  as that will not give you a correct
  interpretation.

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Risk return pay-off

• Each type of fund has a different risk-return
  profile. When comparing the returns of different
  mutual funds, be sure to ensure that their risk
  profile is similar and vice versa. Comparing the
  returns of an equity fund with a balanced fund is
  not suitable as their risk ratio is vastly
  different.
• Thus, when comparing mutual fund investments,
  there are several important factors to consider
  to make the right decision. If you are a beginner
  or someone new to the financial market, it may be
  advisable to opt for expert advice for a better
  decision.