How To Choose Fund Managers To Invest In Mutual Funds?
Mutual fund is an investment program that is funded by the shareholders, traders in diversified holdings and is managed by the professionals which is also known as Fund Managers. It is always important to choose a right fund manager among the plenty out there so as to get better returns and to not end up losing money.
Here are a few parameters in which you can choose a good fund manager:
1) Performance Ranking: More than the recent or long-term performance, relative performance i.e. performance ranking among the peers is very important. Prefer the quartile rankings, that can be easily found over the internet. Always select the company which remains in the first quartile consistently. This can help you to choose a better fund manager to invest in mutual funds.
2) Relevant Experience of the fund manager: One must know about the fund manager and track his past record including factors such as risk exposure, returns of previously managed funds, portfolio churning and so on. This can help you determine how good is your fund manager at his job.
3) Evaluate the Risk Exposure: There might be a case where the fund manager might expose your funds at a higher risk so as to get better returns in an aggressive manner. This might not always suit your risk quotient. So, while choosing a fund manager, analyse all the aspects, mainly the risk quotient.
4) Unusually high turnover: An unusually high turnover might not be a good option and might lead to unnecessary high tax liabilities. So, a fund manager with past records of unusually high returns might add up to the risk of tax liabilities and other tax related issues. Be sure that you check this as well before you select a fund manager.
5) High Volatility: Make sure that the funds chosen by the fund manager is not highly volatile especially in comparison to big indexes. This is because that would mean dramatically varying returns throughout the year leading to lack of consistency. This lack of consistency would surely add up to the risks which are not favorable. It is always better to look for consistently performing ones than the highly volatile ones.
6) Consistency: Try to look for consistency in the returns of general market funds and it might work as a stable source of income without much risk on the investment. This might be a tricky thing to expect from a fund manager but it is better to settle with the one who is close to meet consistent returns rather than losing the money.
7) Try to look for the future insights: Past history may not always guarantee good results. It is better to look for future prospects of the funds by going through the nature and the insights given by the fund manager upon the anticipated trends in the market. This might give a fair idea of how the fund manager is planning to invest funds and about its holdings.
In a nutshell
As they say “Mutual funds are subject to market risks”, one can analyse it with due diligence and by taking calculated risks, one can make it favorable. In this process, choosing the right fund manager remains the first step, for which above factors can be helpful and profitable while investing in mutual funds.
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