Out of the thousand of schemes and options, a mutual fund investor faces a hugely complex job of figuring out those 5 or 6 schemes that should make it to his/her winning portfolio.
Further, once the investments start, there is something more attractive that keeps showing up. Then there is opinion from the media and the experts.
A lay investor is confused to no end.
It pains me to see portfolios turning bulky with the large number of schemes in the portfolio. Most of these schemes don’t add any unique value. The only lure you have is of the recent past performance. Apart from that there is hardly anything worth considering.
Now, when you select a mutual fund, there are a set of useful parameters that you should consider.
You should look at the investment objective, compare the scheme with other similar schemes, look at various qualitative factors and give a due thought if the scheme actually fits into your portfolio. But I guess this is too much to handle.
I just so wished that there was a way I could help you focus on all the above parameters and and more and help you take a considered decision.
After several months of thinking through, I believe I have come up with a tool that you can make use of. It is a simple 20-point MF selection checklist.
What can a checklist do?
A lot. A checklist is a very simple process management tool that is used by a pilot as well as a nursing staff in an Intensive Care Unit of a hospital.
If you want to know more about the power of checklists, read the book “The Checklist Manifesto” by Atul Gawande.
Coming back to our problem whether you should invest in your shortlisted mutual fund scheme or not, here’s the checklist for you.
Actually, it is more than a checklist. It is a checklist cum questionnaire.
This is how it works.
- You have already have a shortlist of one or more schemes that you wish to invest in. You have applied your own criteria in selecting these fund schemes.
- Now you come to the Unovest MF selection checklist and put on trial each of the shortlisted schemes – one by one.
- You answer about 20 questions on the scheme, some about your own profile and your portfolio.
- Once you have done that, a behind the scenes calculator runs through your answers and tells you if you should consider investing in the scheme or you can avoid it.
The checklist will help you get a more comprehensive perspective through its questions. It helps you answer the question “Should I invest in this fund?”
It is important that you read the MF scheme Factsheet or keep it open as you work through this checklist/questionnaire.
Will it work for you?
The best way to find out is to use it.
Let’s also see what this MF selection checklist is not going to do for you.
It is not going to give you any names of mutual fund schemes you should invest in. Once you have selected names you can use this checklist cum questionnaire to assess whether you should go ahead with it or not.
Use it and let me know if this works for you.
I am happy to hear your suggestions to improve it and make it work better.