How To Choose Fund Managers To Invest In Mutual Funds?

Priyanka Sharma

04 Aug 2017

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. 

Have Referral Code?

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

Load More
mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


Banner

How To Choose Fund Managers To Invest In Mutual Funds?

Priyanka Sharma

04 Aug 2017

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. 

Have Referral Code?