Chitra Iyer, COO & Financial Coach at MFA explains why one should trust on mutual fund rankings.
The first thing that you would look at when you want to pick up a mutual fund obviously is to do a search on the rankings of various mutual funds. What essentially does this ranking do? It goes on the basis of returns, on the basis of the performance, on the basis of the portfolio investments of a particular fund, the portfolio turnover and it throw up a ranking but this is not essentially something that you could perhaps go by all the time because the top five funds that would be on ranking in a particular month could be completely different in the next month.
So you need to be aware that you cannot go just by rankings because it’s based purely on past performance and whereas when you take a call you need to look at other things also. So be careful.