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Myth vs Fact: High Rating Means High Mutual Fund Returns

A mutual fund that is rated highly today may not necessarily maintain its rating a year later. While a highly rated fund is a good first step to short list a scheme to invest in, it does not guarantee better returns. There are more crucial parameters to be evaluated before investing.

Schemes need to be tracked with respect to their benchmark and the ability of the management to show its true ability during volatile and choppy periods to evaluate their performance. Past performance in the short term does not matter.

Also, every rating agency ranks a mutual fund scheme according to its own standards. Do your due diligence before selecting a scheme.

Kalpesh Ashar, founder, Full Circle Financial Planners and Advisors

Source : LiveMint