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Monday, October 10, 2016

When to Exit a Mutual Fund ?..

When to Exit a Mutual Fund ?..


When to Exit a Mutual Fund that 
We have Recommended to Our Clients Before - My perspective..
By Mr. B. Padmanaban, CFPCM
Certified Financial Planner

The biggest challenge for today's IFA is when to exit the mutual fund?

Suppose, if I exit the fund now, if it suddenly 
started performing how to face the Investor / client.
We can not be all the time right on our decision, 
but when we do the home work, we will be more right than wrong for sure.

Fund Name
Avg Market 
Cap Rs. Cr
No. of
 Stocks
AUM in
2013 Rs.Cr
AUM in 2016
 (Sep) Rs.CR
Aum
Growth %
UTI Midcap
10,438
87
245
3,605
1371%
Mirae Asset
 Emerging 
Bluechip
14,266
64
157
2,253
1335%
SBI Magnum
 Midcap
7,836
53
185
2,511
1257%
HDFC Midcap 
Opportunities
12,722
73
2,802
12,470
345%
IDFC Premier
 Equity
12,730
52
 3,448
 6,308
83%

First and foremost, last 3 to 5 Years performance is very important
 than 10 to 20 years, why because the market is always dynamic.
Whether the fund manager is able to cope with the 
current environment is very important.

Secondly, how each year the fund is performing, 
is it started deteriorating or / consistent or / highly volatile, 
this can be only seen with the last 5 years data for sure.

Thirdly, the average market caps of the mutual fund versus 
how many stocks in the portfolio also important.
Higher the average market caps will definitely give less volatile, 
if somebody really looking for less volatile in 
the mid-cap space as well.
B. Padmanaban, CFP

Fourthly, whether the fund is continuously getting 
an inflow or not is very important.
The fund which is not doing well will not get the client mind-share.
If the fund is not added any inflow after 2013 close, 
the minimum returns these funds generated is double.
 If the fund is generated only 100% means no inflow!!! 
Whether we continuously recommending or not the 
 overall investing community is not interested anymore!!!

Finally, year on year (Rolling Returns) 
whether this fund is performing with the peer group
 or / too much of divergence among the peer, 
 one needs to really look into.

In the current scenario any mid-cap mutual funds
 should be in a position to take in flow of up to Rs. 10,000 Crore.
If some fund is restricting the inflow, it should
 have outperformed compared to the peer group. 
All the funds are categorized 
by Mid-cap by Value Research online.

Look at the expense ratio, the fund which is 
most consistent is having the higher 
expense ratio which means expense ratio is 
the last thing one should look into when they decided the fund.

 Unfortunately, everyone is looking for the expense ratio first??

I believe this framework helps you to take a
 decision much better whenever we are giving an exit call!!!

p.s. This is my personal view and I am not 
influencing anyone here. I just wanted to share my thoughts. 

B. Padmanaban, CFPCM
Certified Financial Planner
9884349173


When to Exit a Mutual Fund ?.. Reviewed by S. Chitra on October 10, 2016 Rating: 5 When to Exit a Mutual Fund ?.. When to Exit a Mutual Fund that  We have Recommended to Our Clients Before - My perspectiv...

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