How To Choose Mutual Funds? Use KISS Principle

How To Choose Mutual Funds
How To Choose Mutual Funds | KISS

What’s KISS?

KISS stands for Keep It Simple, Stupid.

How To Keep It Simple With Multiple Mutual Funds?

Most people invest surplus money or their savings in mutual funds for long-term. And legendary Benjamin Graham recommends keeping some money in debt portion, even in a bull market. So buy one or maximum two equity funds with a mix of one or two debt funds. Now with KISS, they must be like choose and forget kind. So how to choose mutual funds? Here are the options:

Index fund: ICICI Prudential Nifty Next 50 Index Fund – Direct Plan, Expense ratio 0.39%, beats most funds over the long-term.

Active equity fund with foreign portfolio: Parag Parikh Long Term Value Fund – Direct Plan.

Debt funds: Any liquid fund or ultra short term debt fund (prefer ICICI).

Notes and FAQs:

  • Nifty Next 50 Index returns since launch – 18.88%
  • Parag Parikh Long Term Value Fund is chosen to include high growing and popular multinational companies which are listed overseas (e.g. Google – it’s present everywhere). It is also chosen because it is one of the rare funds where fund managers and trustees have themselves invested crores of rupees in it.
  • ICICI funds are chosen to easily switch between one type of fund to another without routing the money to your bank account. For example, suppose you have a large sum of money but the market is very high, you invest it in the ICICI Ultra Short Term Debt Fund and when the stock market tanks, simply switch or transfer this money to the ICICI Prudential Nifty Next 50 Index Fund. Also, they are chosen considering liquidity and expense ratio of the plans.
  • Always chose Direct Plan over Regular Plan to save or lower the expense ratio.
  • I recommend purchasing mutual funds on the MF Utilities platform, which is free and maintained by AMCs, rather than using paid platforms like FundsIndia.

 

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