How to choose a good fund house?

By | April 27, 2011

Here is detailed information as to what are the parameters of choosing a good fund house:

Basically, there are two types of fund houses

One which are process-driven and the other, which gives autonomy and freedom to the fund managers.

The first category follows a process-driven investment style and the fund manager’s role is to function within the parameters defined by the fund house. Those in the second category give flexibility to the fund managers in taking major investment decisions, like investing in small-caps and unlisted companies, churning the entire portfolio, and taking huge sectoral positions. Both methods have their merits and demerits.
Choose a fund house based on the pedigree, fund managers’ experience, the size it has, past performance, the expertise it can bring in and the frequency of communication you can establish.

A background check on your fund manager as to what is his duration of his employment prior to your arrival, to get the information if he was just an analyst and a fund manager elsewhere etc is some information that you must specifically target.

If he has been an analyst at the same fund house, he will have better knowledge about how the fund house functions.

It is also important to get a better understanding of the past performances, although future returns cannot be based on the same. But, it will give you better understanding about the capabilities of the fund house.

Understand the management and the working of the fund house. Opt for that fund house where you’re investing point of view and your fund manager’s matches. There is no point, if you, apart from your investments, are bound to opt for a personal loan or a home loan just because you did not choose a proper fund house where your investments could grow.

If your investing approach is to get better returns without being more volatile, then opt for a fund manager who follows the value investing approach. But if your investor with a rigorous investing approach and are looking to get higher returns by taking risks then opting for a fund manager who takes extra risk for returns will be beneficial.

If a fund manager consistently wins awards, it indicates that his performance is amongst the best of the lot and you might be the lucky investors to benefit more than a 100% with your savings.

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