Suggest how to choose the most suitable mutual fund scheme for investing.?

A lot depends on what your personality is like. Some people want to put their money into a mutual fund and sit back and hopefully get a 10% annual return. Others like to play around a little and attempt to maybe get a 13% return or even more. They do not get too upset if the value of their investments happend to drop 20%. They figure that over the long term they will make it up. Others actually trade mutual funds like stocks going from ones that are too cool to ones that are really hot currently.

Jeff J gave you a good suggestion, but there is a slight problem with his suggestion for investors just starting out. That suggestion requires at least $15,000 to begin with. However, there are funds that emulate that approach that require much less initial investment. One suggestion is to consider a retirement target fund, even if you plan to cash out before retirement age. They are well diversified and sort of a one stop shopping experience. You can normally begin with about a $2500 investment. Fidelity markets these and T Rowe Price and Vanguard.

If however you are looking for greater potential returns then you will want to concentrate on a mutual fund that has a track record of generating such returns or maybe several. Of course just because they did so in the past is no guarantee that they will do so in the future. There are any number of internet base mutual fund sources available for you to help you with your selection.

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A mutual fund is just a legal structure for investing -- a commingled fund which by buying shares of the fund allows you to own a small share of a lot of other securities, usually stocks or bonds.

Stock or equity funds invest in publicly traded companies. Generally speaking, in terms of risk to reward, these funds can be ranked: (1) Emerging Markets (Foreign stocks); (2) Small company stocks (3) Mid-sized company stocks; (3) Large growth stocks; (4) Large value stocks. So the category that gives you, theoretically, the most reward at a high level of risk is emerging market stocks and the the category that gives you reward at, relatively speaking, the least amount of risk is large company, value stocks. But, as with everything in investing, there are no guarantees and sometimes Growth companies outperform value stocks with no more risk (which means volatility -- ups and downs in price).

A bond is a loan and when you invest in a bond fund you are buying into the loans that a company or a government has taken out and is paying interest on. From most risk to least risk: (1) emerging market (foreign) bonds; (2) developed nation (foreign) bonds; (3) US corporate bonds; (4) US agency bonds; (5) US Treasury bonds. You should expect a higher rate of interest -- more income for your money -- from the riskier bonds. Bonds can decline in value when interest rates go up, though you continue to receive income.

So the first step in picking a scheme is defining your goal. How long will the money be invested? More than 5 - 7 years? Invest in equity funds, both foreign and domestic. You can boil it down to one good global equity fund, if you want, such as Vanguard Global Equity (VHGEX) or you can select from a lot of funds. Remember, most funds don't beat the index (their benchmark) so don't spend a lot of time trying to pick "the best" fund. Patience pays.

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There are various ways of it and it depends on personal investing style. Basic rules to choose good MF are
1. Choose a MF with large corpus size say more than Rs.100 Cr., Larger the amount they handle, chances are more of a good MF.
2. Review its past performance..How much return it gives per annum. Consistently higher returns should be your criteria.

Find out on moneycontrol.com.