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Friday, July 22, 2016

How To Choose The Best Mutual Fund & When To Exit The Recommended Fund Before - Find out

How To Choose The Best Mutual Fund &                                 When To Exit The Recommended Fund Before - Find out 
By Mr. B. Padmanaban, CFPCM
Certified Financial Plannerwww.fortuneplanners.com

The biggest challenge for the financial advisor today is how to choose the right mutual fund and at the same time, what one should look at it to exit, if the already recommended fund is not delivering the return or continuously under-performing.


I  have done a small analysis, hope this is not exhaustive but I believe, this will give you some clue to choose the fund.

Look at the AUM growth from Rs. 150 Crore in 2010  to 1,853 Crore number which is 12 times (1200%) in 6 years whereas from Rs. 9,489 Crore to Rs. 12,047 which is mere 27%.
  


Look at the AUM growth from Rs. 95 Crore in 2010 to Rs. 1,556 Crore number which is 15 times (1538%) in 6 years whereas from Rs. 1,078 Crore to Rs.  1,264 which is mere 17%.
1. When the AUM of the particular mutual fund is increasing steadily & consistently, it clearly shows that there is a regular inflow for the fund manager to take a call, as and when the market throws an opportunity and this fund rally will be definitely, for quite some time from now.

2. I have compared two funds one in large cap/diversified space and another in midcap. To avoid the discrepancy between how the fund is classified by AMC and other rating agencies, I go with the bench mark which the fund is following currently. I believe that the benchmark will not be changed frequently, is the basis for my analysis.

3.  This analysis helps to some extent for me to pick up the best fund for the future as well as, when to exit from the existing fund. Though it is not fool proof, yet it will give some justification from our end for the selection rather than simply listen to fund house view!

4. There is a correlation between the fund AUM growths, versus the fund performance, I have checked some more funds, but to explain this I have taken only two sets.

5. The funds I have selected is not my recommendation, I found the benchmarks are consistent in these funds is one of the reason for the selection.
6. The fund which falls 25% has to rise 33% to regain its place. Though under-performance fund will bounce back, but if it falls heavily in the past, the chances are very less to catch up the one which is more consistent.
 
Mr. B. Padmanaban, CFPCM

7. As an financial advisor, I would like to give consistent equity experience to all my clients than one year super duper & next year flop. Because, I have on- boarded clients at various levels & everyone should have a good experience. Some mutual funds, few have very good experience and other is having a very bad one.
8. I reiterate time & again, mutual fund investments are long term, but not any one particular fund. Today, we have lot of tools to analyze and understand better. To compete the DIRECT mode, we need more dynamic (action) than passive!!!
It is time for us to talk about advisor alpha, similar to what fund house used to say about the alpha the fund created. Our journey is exciting and more challenging, but it’s worth doing it.

9. Fund size beyond some AUM is always a challenge, when we have so many mutual funds to choose, why we are particular about the fund after reaching the saturation level.

10. Last, but not the least we are advisors, so we need to spend more time in understanding the funds, analytics, technology to generate more business than spending more time in servicing and some other petty things.

Note:  I strongly believe every individual investor is unique in their own way, am not questing anyone's belief or selection, I thought of sharing some interesting facts I found when I analyse this. Take it in a right spirit...

B. Padmanaban, CFPCM
Certified Financial Planner
9884349173

How To Choose The Best Mutual Fund & When To Exit The Recommended Fund Before - Find out Reviewed by S. Chitra on July 22, 2016 Rating: 5 How To Choose The Best Mutual Fund &                                 When To Exit The Recommended Fund Before - Find out  By Mr. B. P...

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