How to pick the right MF investment company

5 steps to find out which mutual fund company you should trust your money with.

Investors often ask 'which mutual fund scheme should we invest in?' However, a fundamental question that should logically precede the question above should be 'which mutual fund company should we invest our money in?'

There are 43 mutual fund companies in India. Do you think it is worth to invest in all of these companies? No.

You need to shortlist mutual fund companies first. Then you need to shortlist mutual fund schemes from these mutual fund companies.

This article will guide you how to select a good mutual company to trust your money with.

Your money is in good hands if...

You need to check whether your money is in good hands before making any investment decision. To understand mutual fund companies and shortlist the best out of them, the following parameters would be of immense help.

1. Stability of the fund management team

A good mutual fund company needs to hire good fund managers and make them stay with the company for the long term.

If fund managers frequently move out of the company seeking better opportunities, it indicates the opportunity for growth in this particular mutual fund company is far less.

Do you need to invest in a MF company where the opportunity for growth is less?

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the director and chief financial planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

2. Experience of the fund management team

You want your money to be managed by experienced fund managers and not novices. Then you need to get the answers for the following questions:

What is the experience of the fund management team in managing different market cycles? How have they managed a bull market, bear market, recession, boom etc...?

How do they manage different asset classes? Are they good in managing large cap funds, midcap funds, multicap funds, small cap funds, etc...?

Does the fund management team frequently make company visits and meetings with the industry people to have independent viewpoints?

3. Confidence of the fund management team

Often we read the interviews of the fund management team in media and in mutual fund company's newsletter. After reading these interviews, do you get confidence about the fund management team? Do you feel happy that your money is in good hands?

If the fund management team is confident about facing any kind of scenario in the market, then as an investor your worries will diminish.

4. Stability of ownership

Do the owners or promoters of the mutual fund company have long-term outlook for their mutual fund business or do they look for opportunities to sell the business? It is better to stay with someone who has got a long-term outlook.

When the ownership changes, the possibility of the change in fund management team, change in investment philosophy and process goes up. This brings more uncertainty in the way the funds are managed. Therefore stability of the ownership is an important parameter in selecting the right fund house.

5. Confidence of the management team

This is entirely different from the third point above. Apart from the fund management team, the other management team needs to behave in such a way that creates confidence.

Does the sales team follow ethical practices? Are advertisements from your mutual fund company labeled as selling or mis-selling? How does the top management feel about their company's business progress?

The answers to these questions will help you understand the confidence level of the management team.

The five parameters mentioned above should guide you in investing your money with the right people. Choosing a right mutual fund company is the first step in making a right investment in mutual fund. Please make sure your first step is in the right direction.

The rest will follow.