All Mutual funds are not always correct

Mutual funds are best options for savings and achieving our goals. But when an investor goes to invest into mutual fund, he finds difficult to select which fund would work to be the best. There are various mutual funds schemes out in the market, and I would guide you today to not choose these funds because of certain reasons. Lets start.
Nowadays, in every sector there are few negative techniques to grow business. For example, in medical sector, pharmaceutical firms are offering their medical representative, an attractive commission to build up their business revenue and MRs (Medical Representatives) are not focusing on customer benefit in front of their own. In a same way, Mutual funds companies are also offering the same offer to boost up capital into fund schemes and few financial advisers mostly advise us on the basis of their high commission, not on the basis of our goal. It is not sure that all financial advisors are greedy but before choosing any mutual funds on basis of advisor's recommendation, think about the below reason:

Sector funds:
Few advisors are recommending sector funds like infrastructure funds, pharma funds etc. and we invest our money into it and our money goes down with any negative impact on specific sector. For example, if govt. ban import of any drug which is usually used pharma sector. In this case, stock value of this sector will fall and our mutual fund's NAV too. In a same way if any difficulty occurs on any specific area where infrastructure companies are planning to do business, our value of investment can face up side down situation.

Index Fund:
Index funds are usually those where our money is invested into stocks listed in Nifty50 or BSE30. NAVs of these specific fund are based on proportionally distribution of capitalization. Fund managers don't go through fundamental or technical way to pickup the stock. So if any negativities or rumours affect the Sensex or Nifty, our NAV goes down with these.
For example, sometimes in stock market good and well performed shares go down for any random reason. As their fundamentals are strong and chances of recovery is highly expected. But due to sudden fall, these shares can lost their place from Nifty50 or BSE30. In this way, fund managers are bound to sell their holdings in low price and have to buy newly added stock in place of old stock on high price. This time stocks are sold in low price and buy in high price which make a negative impact on NAV.

New Fund Offering (NFO) Fund:
I highly recommend you not to go with any of the NFO funds without having proper fundamental analysis because advisors are offered high commission to achieve capital target. We cannot know whether this stock will perform well or not. So be wise and plan any strong diversified fund to invest into.

Before choosing any mutual fund, I would suggest that go through internet and gain some knowledge, analyze its past performance, fund managers performance and ratings and analyze its ratings. So you can get true value of your investments.

I hope by following my blogs you will get good knowledge to choose the best among the rest in Mutual Funds.


Thanks
Saurav..