Spotting a Bad Mutual Fund in 2024

Warning Signs  You Shouldn't Ignore

Himanshu Panwar 29 October, 2024

High Payoff Opportunity

Penny Stocks could bring exponential gains. A small investment could blossom into a fortune if the company succeeds.

Photo - pexels/voitkevich

Falling Short of the Benchmark

A strong sign of this is if a mutual fund's performance chronically falls behind its benchmark index.

Photo - pexels/shkrabaanthony

High Expense Ratio

The high ones can chew up your returns. Watch those that are well above average.

Photo - pexels/kiersten

Frequent Management Changes

Manager changes too frequently; this causes inconsistency and underperformance. The key to everything is continuity.

Photo - pexels/fauxels

Poor risk-adjusted returns

If the returns of the fund don't justify the risk, it is time to review your investment.

Photo - pexels/anna

Lack of Transparency

If a mutual fund isn't forthcoming about its holdings or fees, it may be hiding something. Be suspicious.

Photo - pexels/mikhail

Overconcentration in one sector

A fund heavily invested in one sector is riskier. Diversification is crucial for stability.

Photo - pexels/voitkevich

Decline in Assets Under Management

With the declining AUM, investors are losing confidence slowly. Maybe it's time to follow suit.

Photo - pexels/dziana

Poor Fund Manager Reputation

Check the fund manager's history. Bad previous records could be the result of future troubles.

Photo - pexels/anna

High Turnover Ratio

High turnover demonstrates regular trading, which causes extra costs and tax inefficiencies.

Photo - pexels/voitkevich