Choosing the right fund is often the key to gaining most in these kinds of funds as the fund manager has a huge universe of stocks to choose from this category. So what should be the parameters to keep in mind while selecting a fund?
- Fund managers: They are often instrumental to the returns that are generated. While selecting a fund it is advisable to ensure that the fund manager responsible for steady performance of a fund has a good and consistent track record of selecting stocks for these categories.
- Performance: It is important to take note that the steadiness with which a fund has performed. In case of Mid and Small Cap Funds the acid test is falling markets. If a stock has been able to hold up and weather the fall with minor fluctuations and not crash because of the fall in the market then that stock could make a potential good investment.
- The Mode of Investment: If you are not too sure about the performance or afraid of the volatility the scheme presents then lump sums may not be a good idea. To begin testing waters Systematic Investment Plan or SIPs could be a way to tackle volatility where you can invest an amount as small as Rs. 500 per month thus reducing risk on investment.