Mutual funds investment statergy

POSTED BY vj-manutdfan ON December 9, 2011 9:45 am COMMENTS (5)

Hi guys,
q1)What statergy most of the mutual fund managers follow.Do they opt for Long term value investing or Day trading(which is mostly speculation).

Q2)I read the book Stocks to riches book by parag parikh who is a very experienced investor.He is of the view that Mutual funds is an idea whose time is over.He says that the mutual fund managers in an attempt to beat thier respective index they opt for speculation where they should have gone for value investing in long term.What do you think abt this?.If they go for speculation wat is point of putting my hard earned money in those mutual funds

Q3)Can we ask the mutual fund manager his statergy(if he goes for long term or he does speculation).Will the manager answer my question

Thanks a lot in advance,
Vj

5 replies on this article “Mutual funds investment statergy”

  1. Dear Vj-manutdfan, The basic query is already answered by dear Ramesh. Here are my input. Most of the time, it’s the investors (We) who force fund managers to perform above index. A small blip in the performance & redemption ‘ll start. which ‘ll put more strain on fund manager to perform.

    Regarding Parag Parikh’s statement, I’m fully agree that the time of MF investing is over for those investors who understand all the nitty gritty of Eq. market. For the illiterate ones (including myself) & the poor ones (who do not have large sums to invest in a bucket of choice of stocks in lump sum), MFs are the only solution.

    Thanks

    Ashal

    1. Ramesh says:

      For a rough estimate, I would get a personalised manager, when my equity-related corpus will reach a sum of over 1.0-1.5 crore. At that time, getting a personalized professional manager @ 1% is better money spent.

      Below that amount, MF are the way to go.

  2. To put simply – As much as listed companies take short sighted views to show better results Quarter over Quarter Mutual Funds are no different. Beng on top of the ranking tables is what everyone aspires for (so they can garner more assets to manage) so you have to keep showing performance – resulting in churning.

    I am sure 99 of us will choose a fund growing 20% every year to some other fund that returns 14% for 4 years and a mammoth performance in year 5 (by value picks gaining market visibility) and improving their overall 5 year average to 23%.

    ——————
    @Ramesh – just loved the speculation/vision one!

  3. Ramesh says:

    I will attempt to answer them.
    1. Strategy depends upon the fund house and the team including the fund manager(s). So, you need to check out the manager as well the particular fund house. In my opinion, Franklin Templeton and Fidelity are the best fund houses. DSPBR comes second, though I dont incline to their system of churning, but still those people have their own system of working and have delivered well. HDFC and Reliance are quite reasonable. I dont follow the others to have any comment.

    2. Value investing in long term is not simple and easy. It looks good on paper. Even Buffet & Munger have tweaked the classical value investing with a reasonable amount of growth investing. And none better than Peter Lynch’s ideas of investing. Speculation is part and parcel of investing in stocks, and mostly it is a hindsight thing only. I dont think the idea of MF has gone. His criticism of index is justifiable.

    3. All the MFs have a brief representation about the type and basic strategy of how they will invest. Valueresearchonline and Morningstar give a good review of many funds. You can check them out too. Lately, morningstar’s reports, which were free earlier, need some kind of subscription. But if you can, check them out. You can still ask, but I am not sure if any fund manager will give you any ‘direct’ answers. Both the sites also give a box-style of funds, based upon their style divided into large/mid/small and value/blend/growth.

    Convoluted answers are the standard practise, and I think that is reasonable. Nobody, means nobody, can predict correctly about whether equity markets will go up/down/sideways and to what extent. Hope is the best answer (if you want to label it as speculation, then so be it). If it proves to be correct, you label it as Vision!!

    I hope this satisfies some of your queries.
    Ramesh

    1. vj-manutdfan says:

      Thanks a lot ramesh

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