8.49Practical mutual fund selection checklist
1What is it?
Use this list before investing in any fund.
2Why does it exist?
A checklist stops emotional decisions.
3Diagram
| # | Check | Pass if… |
|---|---|---|
| 1 | Goal and horizon | Category matches your time horizon |
| 2 | Category | Right risk level for you |
| 3 | Plan | Direct + Growth (unless you need advice/payouts) |
| 4 | 3/5/10-yr returns | Top half of category consistently |
| 5 | Benchmark | Beats benchmark TRI over 5 years (active funds) |
| 6 | Risk | SD and drawdown not worse than peers |
| 7 | Sharpe/Sortino | Above category average |
| 8 | Expense ratio | At or below category median |
| 9 | Manager | Stable tenure, good record |
| 10 | Overlap | Doesn’t duplicate funds you own |
| 11 | Exit load and tax | Understood |
4Quick revision
- Goal → category → plan → performance → risk → cost → manager → overlap.
5Knowledge check
Q1. Which plan type is usually cheaper?Show answer
Direct.
Q2. What should match your horizon?Show answer
The fund category.
Q3. Name two risk checks.Show answer
Standard deviation and maximum drawdown.