How should one select a fund? Is it fine to blindly start an SIP in a five-star-rated fund?
- Senthil
I would say that if you want to derive benefits from investing regularly in a market-linked investment plan, it is important to decide what kind of fund fits your requirements, rather than going by any rating or specific funds. Hence, the key here is to choose the appropriate category. If you have never invested in the market, start with an aggressive hybrid (balanced) fund. Even if you choose a five-star fund or a four-star fund, it doesn't matter until you are investing in it regularly.
In any case, the five-star rating is based on the past performance of a fund and there is no prediction about which fund will gain the rating in the coming time. I can tell you from my experience of looking at mutual funds so closely over the last thirty years that it is not possible to predict the performance of any fund and I can't do it. So, choosing the appropriate vehicle based on your needs and time horizon is far more crucial than choosing a good fund. Also, I would say that investing in one-two funds from the universe of five-star and four-star funds is good enough for you to begin.
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