Step 6: Select the Right Product & Scheme

The next step comes to Selecting the Right Product & Scheme once you have decided your asset allocation.

Most of the investors straight away go on to select the scheme based on the historical returns and skip all stages already mentioned previously. They ignore the very basic fact that the past performance of the schemes does not indicate future performance. This leads to frustration eventually when their investments don't perform as per our expectations. 

(A) PRODUCT SELECTION

Once you have performed the earlier steps, you are now clear about your investment objective, time horizon, and risk-return expectations. It is now easier to match one's investment objective with the various schemes and determine the right mix of products available to you. 

 (B) SCHEME SELECTION

In a mutual fund, we have different categories:

• Equity Fund – Largecap, Midcap, Small Cap, Multicap, ELSS, Value Fund, Thematic, Sector Fund, Dividend Yield Fund, Index Fund
• Hybrid Fund – Aggressive Hybrid, Balanced Advantage Fund, Conservative Hybrid, Asset Allocator Fund, Multi-Asset Fund
• Debt Fund – Liquid, Ultra-short Term, Low Duration, Credit Risk, Gilt, All-season Bond, Floater Fund

So within the asset class category again it totally depends on your need, financial goal, time horizon, and risk appetite. One should match scheme objective, investment philosophy & investment option

It is a study of respective scheme objective and their investment philosophy within the chosen asset class.

Disclaimer: Mutual Funds investment are subject to Market Risk