What are you looking for when investing in mutual funds? What are your investment needs? The more well defined these answers are the easier it is to find schemes best for you. So how do you assess your needs?

The answers obviously lie with you. But the questions investors ask to assess their needs are possibly the same. You might ask yourself: At my age what am I expecting out of investing? To assess the needs investors look at their lifestyles, financial independence, family commitments, and level of income and expenses among other things. Questions can be many but to get cracking ask yourself these two:

What are the returns you want on your investments?

Do you have well-defined time period for the returns you expect on your investment?

The father of an aspiring engineer who would have to shell out the boy's institute fees soon enough, could reply: I want a fixed monthly income of about Rs.5000 per month. To the second query he might say: Yes, for the next four years. When asked, the just-out-of-B-school graduate planning for his new Zen could reply: I should make about Rs. 60,000 by the end of one year.

Believe us, but getting the right answers to these questions does a lot to simply your fund picking exercise. Having defined the needs that direct you to invest, one can find a category of funds that come close to satisfy your needs with their objectives.

Contrary to the commonplace thinking, mutual funds do carry risks. And there are some that can become as risky as stocks. Given the almost diverse objectives with which schemes operate, there are some with more risks and some relatively safer.

Ask yourself if you are ready for a scheme whose investment value might fluctuate every week or one that gives a minimum amount of risk? Or are you in for a short-term loss in order to achieve a long-term potential gain? At this point it is good to ask oneself how will you take it if your investment fails to deliver the returns you expected or makes losses. Knowing this will reduce your chances (or even temptation) to select a fund that doesn�t come close to your objective.

Evaluate a scheme by looking at how its NAV has behaved over the past. Do you see the scheme behaving rather erratically i.e., the NAV changes just too often? More the volatility more are the risks involved.

Great returns are not the only thing to look for in a scheme. If you feel while researching a scheme, which we will do later, that it�s returns are modest and steady and good enough for your needs, avoid other schemes that have recently delivered high returns. Because great returns in the past are no guarantee for the fabulous performance to continue in the future. Never forget one of the commonplace morals of investment: The schemes that are expected to give the highest returns have the greatest probability to fall flat!

The success of your investment depends in a large measure on the objective you define. Having defined that, choosing a fund isn�t difficult. Through a search of schemes on our advanced search you can draw up a list of schemes that come close to the objectives you have set. Our search allows you to set criteria based on your objectives. The criteria you can set are:

The scheme�s expense: All schemes have a minimum requirement for the total amount of money you can invest. Usually they begin from a minimum of Rs.5000. Do a check for the expense ratio and sales charges the fund has. The NAV is good enough to know what each unit of the scheme will cost you. But, remember a low NAV (sometimes even below the usual offer price of Rs.10) may make a scheme more affordable as you can acquire more units but chances are the scheme is not performing well.

The scheme�s performance: Returns from schemes are calculated over various periods from a week to one year or more. For each time period specify the returns. While you enter returns figures the maximum, minimum and average returns for all schemes in the category you have chosen are also displayed.

The scheme�s fund house: Over the years fund houses in India have established a name for themselves for their investment style and their performance. Hence, some investors usually try to satisfy their diverse investments through one fund house. If you have been recommended a fund house choose the fund to list all schemes under it.

Investment mix: If you know of an industry that has been doing particularly well, you can select schemes that have invested in that industry. You can also select schemes that have invested in companies with a dazzling performance.

Once again, back to the basic question. You came here looking for schemes that can suffice your investment needs. You might be like many others who actually have multiple needs. Consider going for a combination of schemes.

Yet another recap of the basics: one of the things that made these mutual funds great was diversification. While you might have selected a scheme that has a diversified portfolio, you can also go for more than one schemes to further diversify your investments.

It is well possible that just by picking more than one scheme from one fund house you can achieve enough diversification. In fact many investors who have tried out a fund house for long and developed a trust with the fund, prefer to pick another scheme from the fund's basket for their new investment needs.

But convenience sometimes leads to venerable prejudices that might deprive you of trying something new and better. There could be a better-managed scheme in a different fund house that you are missing out on if you decide to stick to your old fund house for convenience sake.