5 Mutual Fund traits for good long term investment

Mutual funds are great investment avenue. They provide a layman investor to exposure of capital market in a single window. Mutual fund houses try to purchase various company based on their analysis in different ratio. This ratio is key for good return. Primarily there are two kind of mutual funds. Active and passive. Passive mutual fund try to replicate the index i.e. share market exchange Sensex without putting their own investigation. 

Active mutual fund managers try to combine their views in ratio of stocks they purchase. Each active mutual fund has their own set of companies based on market capital size, bonds, gold etc. So in this way, Sensex is always a benchmark for mutual fund performance and fund manager is key to the success of a mutual fund. 

"If you do not trust on mutual fund's manager, invest in passive mutual fund. At least they will grow by the amount of industrial growth of a country."

However many mutual funds surpass Sensex performance with hefty margins. So it is always beneficial to know the parameters of a mutual fund performance and how to identify a good mutual fund for SIP and long term investment. Below are the 5 well established Mutual Fund traits to fetch good return: 

1. Fund house manager:  Forget about every thing, fund house manager is key to the success of a MF. He is like a CEO of your small investment company. His decisions, brilliance, discipline and imagination can only fetch good return. We need to look his experience, (not MBA degree) and years of running current MF. These information is available with every MF and they can not deny to disclose it. You need to know his 1,2,3,5,10 years and since managing track record.  
2. Investment Avenues: You should always read the investment avenue disclosure. It means what kind of companies they consider for investment. Examples are, small cap, mid cap, large cap, ratio in gold and debt investment. In this way you can know that how much risk you are taking. Some mutual fund are liquid funds they invest only in debt and some portion in gold. These funds are very safe to invest however attracting less return. 
3. Alpha, beta, sharp ratios, standard deviation, and R-square: These ratios  represent performance of MF against volatility, longevity, and deviation from Sensex. Please read following link, as I find a waste of effort in re-writing. Five important ratios for MF
4. Open ended, closed ended, locking period: ELSS in India are usually locked for 3 years. 
5. Size, Diversification of portfolio, entry exit and annual maintenance charge: Pay your broker well but do not overpay. This is a simple rule for entry/exit/annual maintenance charges. Size of MF must be more than 1000 crore. It signifies that huge number of people trust in this fund. If it is not a sectoral fund then believe on MF manager's diversification skills.