How to Choose a Good Mutual Fund

 1. Mutual fund investment manager reputation

The reputation of a mutual fund investment manager is the main and most important criterion in choosing a good mutual fund. This is intended to prevent unwanted mutual fund risks such as default or sub-optimal management of mutual funds.

2. Rate of Return

The thing to consider next is the level of profit. However, it is not certain that the higher the profit the better. Not only focusing on short-term profits, but also need to pay attention to performance for the past 5 or 10 years. And fill the Top Holdings of the mutual fund. It should also be noted that the risks taken by mutual fund managers are balanced with potential profits. Printing consistently in the long run is much more important and more difficult than profits in a year alone.

3. Level of Risk

All investments have risks. The greater the profit the greater the risk (High return, high risk). In mutual fund products, the max drawdown can be measured. Max Drawdown is the maximum decline in a mutual fund from the highest price point to the lowest price point, before the new high price is reached during a certain period. Max Drawdown is an indicator of the risk of decline in a mutual fund over a certain period of time. If the Max Drawdown of a mutual fund is 10% in a year, this means that the mutual fund has fallen by at most 10% from its highest point in the past year. So Max Drawdown is quite helpful to measure whether the risk of this mutual fund is still acceptable or not.

4. Managed Funds (AUM)

Managed funds or often referred to as AUM (Asset Under Management) are funds managed by these mutual funds. The managed fund can be used to measure how much this mutual fund is trusted by investors. The greater the managed fund for a mutual fund, the higher the level of investor confidence in the quality of the mutual fund's Investment Manager.

5. Expense Ratio

Expense Ratio measures how much it costs to manage mutual funds. Management fees, Custodian Fees, Trading Fees, Marketing Costs are part of the expense ratio calculation. Smaller is better.