Investing in mutual funds online is a lot easier these days with mobile apps like the Tata Capital Moneyfy App, simple investing procedures like SIPs (Systematic Investment Plans), and a wide range of fund options to choose from. However, an expansive variety of mutual funds can make it hard to pick suitable options. Stakes can be higher in the case of equity funds because of the inherent risk involved. However, the following steps can help you choose the right investment for 2022.

How to choose the right mutual fund in 2022?

  1. Assess your risk appetite: Although all equity mutual funds are commonly considered risky, some may be riskier than others. Therefore, when you invest in mutual funds online, select an option based on your risk capacity. Aggressive hybrid funds may offer relatively lower risk within equity. Large-cap funds may also present relatively lower risks than small and mid-cap equity funds. Flexi-cap funds may provide exposure to companies with different market capitalizations and lower risk. Another type of equity fund, sectoral and thematic funds, could be very high-risk options as they invest in only one sector or theme and hence, can be extremely volatile. You may choose a fund based on the level of risk you are comfortable with.
  2. Check the fund’s performance:The past performance may not necessarily determine the fund’s future, but it can be an honest glimpse into it. Before investing in equity mutual funds online, you can check if the fund beat its benchmark in the past and for how many years. Additionally, see how the fund performed during different market cycles. Check if the fund performed well during a particular phase or was it consistent throughout.
  3. Look at the fund’s portfolio: The portfolio is another critical thing to check when you pick equity mutual funds Going through the underlying stocks and other securities can give you a better picture of the fund’s performance. The fund’s diversification and turnover ratio are some things to look out for. A well-diversified portfolio can cut down risk and offer better rewards. A high turnover ratio can increase the expense ratio but may result in good returns, depending on the capability of the fund manager. You can also check the fund’s size or assets under management (AUM). A very big or a very small fund size may pose more risk.
  4. Expense ratio and exit load:The expense ratio refers to the charges of the Asset Management Company (AMC) for handling your investment. Likewise, the exit load is the fee paid when you redeem your funds within a specific time after investment. The expense ratio and exit load can differ for different fund houses and can ultimately add to the cost of your SIP. So, check the costs involved to make a better decision.

To sum it up

Starting a SIP in an equity mutual fund can help you achieve financial freedom in the long run. However, it is essential to keep an eye on the tips given above to make an informed choice. You can also use the Tata Capital Moneyfy App to browse through different options and make the right selection.