A simple guide to picking the right Mutual Fund

The Indian mutual fund industry has seen a massive surge in popularity. As of February 28, 2026, the total Assets Under Management (AUM) reached ₹82.03 lakh crore. To put this in perspective, just ten years ago, in February 2016, the industry AUM stood at approximately ₹12.63 lakh crore, representing a growth of more than six times in just a single decade.

For a first-time investor, however, this sheer volume of choices can feel overwhelming. Picking the right fund is not about finding a ‘magic’ scheme, but having a logical process of selection that can be applied over and over again.

Follow the golden rule of comparing like with like

One of the most common mistakes amateur investors make is to compare mutual funds from different categories. For example, you may see a Sectoral Fund that delivered 30 per cent returns over the last year and be tempted to compare it against a Debt Fund or Index Fund that you hold and which did not match these returns. This can be a fundamental error.

The reason is that different categories of mutual funds have different risk profiles and underlying assets. To make a fair assessment, you must compare mutual funds within the same category. If you are interested in a Gold Fund, your comparison set should strictly include other Gold Funds. When you look at two funds in the same category, it allows you to evaluate parameters like:

• Expense ratios: Does Fund A charge significantly more for managing the same assets as Fund B?
• Performance consistency: Has Fund A consistently beaten its benchmark over three, five and seven-year horizons?
• Risk metrics: How much volatility did the fund manager take on to generate those returns?

Use a digital filter like an MF screener

Imagine trying to book a flight without a search engine. You would have to call every airline, compare flight timings manually and check prices one by one. It would be difficult. Yet, many investors try to pick mutual funds without using a Mutual Fund (MF) Screener.

The MF screener is nothing more than a sophisticated search engine for your money. Just as you would filter for “non-stop flights” or “lowest price” on a travel website, an MF screener allows you to set specific parameters to cut through the clutter when it comes to selecting the right mutual fund to suit your investment needs. You can apply filters to turn an exhaustive list of say 500 funds into a short list of under five funds that actually fit your criteria. When using a MF screener, make sure focus on these three filters:

• Expense ratio: Lower is generally better. Because fees are deducted from your returns, a lower expense ratio over 10 or 20 years can translate into significant additional wealth.
• Long-term returns: Look for 5-year or 7-year rolling returns rather than just the last 12 months. Capital markets fluctuate and you want a manager who has survived multiple market cycles.
• Fund size (AUM): While bigger may not always be better, extremely small funds may lack the resources or stability to manage your capital effectively.

Select the right investment platform

Once you have identified the mutual fund that you want to invest into, the next step is selecting the platform you use to invest. The choice of platform is an important one. You should prioritise one that provides transparency and control. Look for these three pillars:

• Direct plans: Always opt for direct plans. Regular plans include commissions paid to agents, which are deducted from your investment. Over time, these commissions eat into your compounding. Direct mutual fund plans have lower expense ratios, leaving more money in your pocket.
• Digital receipts and tracking: The platform you select should offer a seamless dashboard where you can see your real-time portfolio value. You should receive instant digital confirmation for every purchase or Systematic Investment Plan (SIP) instalment.
• SIP flexibility: A SIP is your best friend for wealth creation. Ensure your chosen platform makes it dead simple to start, pause, or stop a SIP. You should never feel locked in by a user interface.

Choose the right level of risk tolerance

If you find yourself constantly checking your phone, feeling anxious when the market dips, or tempted to hit “sell” during a correction, you are likely in a fund that is too aggressive for your personality. You can find the “best” performing fund on paper, but if that fund is so volatile that its value swinging by 5 per cent in a week makes you lose sleep, it may not be the right fund for you.

In this case, for instance, you can use your screener again and filter for “Low Risk” or “Conservative Hybrid” options. The best fund is not necessarily the one with the highest historical return. It is the one that aligns with your financial goals while allowing you to stay invested through the inevitable ups and downs of the market.

Conclusion

Investing in mutual funds needs to be done with discipline and with the right strategy. By comparing funds within their specific categories, using screeners to narrow your focus, choosing platforms that favour direct plans, and keeping in view your personal risk tolerance, you can become an effective investor.

Note to the Reader: This article has been produced on behalf of the brand by HT Brand Studio and does not have journalistic/editorial involvement of Mint.