Queris about Mutual Fund :
How to select the MF to invest? What factors sould I consider before investing into some?
How helpful is the last 1/3/5 year performance?
Hmm, here I thought there will be at least some discussion on this point. Looks like everyone is hiding their money under their mattresses
But then again you have asked a question about which people write 100s and 1000s of pages. So I am not sure anyone can actually teach you how to choose a good MF.
Anyways my two bits:
Before you start, go over the post where I tried (and really did!) to explain terms to
@avi . Understand and digest it a bit.
Then do a test. Litmus test: Did you ever salivate hearing stories about a colleague's unknown friend who made tons of money buying Satyam at under 10rs? If yes, then you are ready to take some risk.
Jokes aside, you need to define a risk profile. Is it high risk, high gain or the low risk, low gain types. Based on the risk profile you can find some MFs. There are many sites which list MFs based on their risk profiles. Pick one there.
Now one of things, at least I do, is to check the constituents. How does it change over time? Is it heavy on any particular company/sector (if it markets itself "balanced"). Mail the portfolio manager about your queries - why this heavy or less in this etc etc. Here, a human gut feeling will kick in (I know not really a good idea). Does he makes sense or its just some BS?
And you obviously don't want something like this (aside from the fact that I think gold Mfs/etfs are stupid. Want gold, buy it!!) :
http://www.sbimf.com/SBI_Gold_Fund/index.html
This says - "SBI Gold Fund is an open ended fund of fund scheme, which will invest in units of SBI Gold Exchange Traded Scheme (SBI GETS). The scheme seeks to provide returns that closely correspond to the returns provided by SBI GETS.". Hmm, now what is this SBI GETS?:
http://www.moneycontrol.com/mutual-funds/nav/sbi-gold-exchange-traded-scheme-sbi-gets-/MSB211
So basically take money from one SBI arm and lend it to another. A slightly more unscientific view will be the returns comparison. Looks like the MF is under performing its invested security by a margin. Never invest in funds like these.
As for the 1/3/5 years returns. Do they matter? Short answer - no they don't. Long answer - Past performance does not guarantee future results. So they dont matter.