To judge anything is tricky, particularly when it comes to performance. Same is the case with Mutual funds. However, it is also important that one keeps monitoring one’s investments on a regular basis.
One of the easiest way to check if you are in the right mutual fund is to check if it is “regular” or “direct”. Direct mutual funds help you earn up to 40% more than Regular plans over a 20 year period. So, if you are invested in a “regular” plan for the last 3 years, it is time to switch to direct.
Read more: How to Invest in Direct Mutual Funds – Jama
Second aspect is the investment philosophy of the fund. If you are looking for better returns, Index funds can be avoided as active funds have given better returns than passive funds. Similarly, sectoral funds do not offer diversification and one is better off avoiding them.
After the above simple tests, look for consistency in performance. Has the fund been among the top performers across time periods. It does not have to be the best. It needs to be consistently among the best. If there is too much volatility, such funds might not be the ideal choice.
A fund that is consistently giving negative or low returns, failing to beat benchmark quarter after quarter, can be considered for exit.
If none of the above reasons hold, then you are probably invested in an actively managed diversified direct mutual fund that is consistently beating its benchmark. No reason to switch.
