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Choice of a mutual fund

Criteria for choosing an investment fund

“How to choose a mutual fund?” – for many novice investors, this question causes difficulty. But in fact, there is nothing difficult in choosing a mutual investment, as there are universal criteria by which you can select the most reliable mutual funds.

Lifetime of the fund

The mutual investment fund and its management company (management company) must pass the test of time. The most suitable period is five years. If the fund has successfully overcome this temporary barrier, then this indicates its greater reliability compared to other, "younger" mutual funds.

Fund Assets

The value of the funds assets. What are the assets of the fund?

Fund asset = value of securities + amount of cash - liabilities

Fund costs

The sum of the funds costs. The smaller the costs, the more money remains in the fund, and, consequently, the greater the value of the share will be, which will positively affect the investors income.

  • The first cost is paying the fund manager. Of course, it is most profitable to deal with those mutual funds where the managers remuneration is less. After all, it is from the money of investors that the funds that go to pay managers are deducted.
  • The second cost is the payment for the services of the auditor, registrar, appraiser, and depository. The amount of such costs usually ranges from 0.6 to 3.2% for various investment funds. You should also pay attention to the amount of expenses at the expense of the fund, as they are deducted from the property of the mutual fund.


It is this criterion that novice investors most often focus on. And this thought is not devoid of rational grain, since it is the profitability that is the easiest way to determine how efficiently the fund is working. But, do not forget that the results shown by the fund in the past will not necessarily be repeated in the future.

Studying the yield for a short period (month, quarter), you are unlikely to be able to correctly assess the future yield of a mutual fund. Therefore, take profitability indicators for longer periods - one year, two and five years. If the fund shows good returns on all these periods of time, then we can safely talk about its stable work.

Choosing a mutual fund by objectives and approach

To make the right choice of a mutual fund, lets start by defining the objectives of this fund. The tasks of the fund are formed depending on the attitude towards risk and profitability.

Types of PIF tasks:

  1. Preservation of capital. Conservative approach.
  2. Balance between acceptable return and acceptable risk. Moderate approach.
  3. Making profit. Aggressive approach.

Now that the task is defined, we need to select the main types of suitable funds. For example, we have task number 3, the maximum profitability of the fund. That is, it is important for us to make a profit, and risks are not important (100% loss of capital is allowed). So, stock funds are suitable for us, and second-tier stock funds can be considered. These funds can have a dizzying rise in quotes in just a few months, but they can also collapse overnight just as dizzyingly.

If you need a conservative portfolio, then you will choose from funds that invest in government bonds, treasuries. Such funds, as a rule, do not show high returns, but the risks of losing invested funds tend to zero.

When you have decided on the type of fund, the question arises: “Which mutual fund to choose?” In other words, how to choose a specific mutual fund from the many offered on the market. To do this, you should start with the criteria indicated at the beginning of the article, namely, with the analysis of management companies. How long has the company been on the market? How big is the company? Her results, etc.

After you have selected 2-3 most attractive companies, you are left with about 10-15 mutual funds with which you will have to work in more detail. More precisely, it will be necessary to work out the history of the fund in order to compare it with the corresponding index. If we are talking about shares, then you need to use the MICEX index. The main thing is that the fund should be at or above the level of return relative to the index. After these simple manipulations, you can easily opt for 2-3 mutual funds, in which you will need to invest.

I think now, thanks to this article, you will more clearly understand how to choose a management company, mutual fund and invest in it correctly. Happy investment!

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Choice of a mutual fund
My shares2022-10-2200:00Rating: 5
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