Should you only invest in mutual funds with large fund sizes?

New Delhi: Mutual funds are the safest option by which a person can enjoy the benefits of investing in stock markets, debt securities, corporate bonds, and other market tradable assets. It is a typical notion that people prefer to associate themselves with larger shops and enterprises following which there is a false-bias with regard to the asset sizes of different mutual fund schemes. The funds with huge assets are primarily preferred over a similar fund type with low asset value.

As far as the investment in mutual funds is concerned, the people should refrain themselves from filtering mutual funds according to their respective fund sizes. There are a number of other parameters with the help of which the mutual funds can be assessed more accurately. Unlike companies and enterprises, the size or the total asset value of a mutual fund doesn’t matter when it comes to investing.

The expense ratio, load factor, fund managers’ experience, past performance of the fund (however, it is not an indicator for future performance), selection of assets, frequency of revision and investment focus are some of the parameters which can be considered before selecting a mutual fund scheme. The size of a fund is just like a proportion of shares held by a scheme. Two mutual fund schemes with similar investment rationale of different fund sizes will only differ in the number of shares purchased.

Relatively, the conclusive return of both the mutual fund scheme will be similar. The only difference would arise in the absolute capital gains realised or notional. Moreover, there might be a couple of differences in the exit load, lock-in period (if any), expense ratio due to the presence of distinctive fund houses.

Ease of investment, relatively lower risk as compared to direct equity investment, no requirement for tracking markets on a daily basis are some of the prime advantages of investing in mutual funds due to which most of the risk-averse, middle-income groups, salaried-class people, as well as high net-worth individuals are attracted towards mutual funds.