Are you buying top rated mutual funds?

Most of us investing in mutual funds will go to the likes of moneycontrol and economictimes and start looking for top rated funds to invest. Is this the right strategy, to some extent I would say it's not.

I say this for following reasons

• Rank always reflects how the fund has been performing in past and does not guarantee that the same fund would be performing well in future. 
• If you are investing in top rated funds, everyone else is also doing the same. Hence, the fund manager starts getting lot of inflows to the funds which are difficult to depoly in good quality assests. Over the period this would end up avergaging out the quality of the assets and hence dipping the performance of the fund. 

Hence, don't choose rating as the only parameter for choosing fund. You should as well see the other factors 

• Funds rank in the category for 1 year, 3 year, 5 year, 10 years and since launch
• Funds that have performed well during the market crashes
• Fund managers track record 
• Funds investment style

To keep it simple, choose really few funds one to two equity funds, one-two hybrid funds and one-two debt funds. Don't go for more than a fund or two in any category. And review your portfolio every 6 months at-least.