The most frequently asked question by most investors is: Which is the Best Equity Mutual Fund?
When you approach your fund manager, who explains to you in the market language about various terms and phenomena which a particular fund might have faced. They might have even pulled out various graphs and showed you how the fund might have survived the drastic changes in the market in the last 3 years.
Then your manager might show some inquisitiveness to know what your financial position is, do you have any loan amounts to prepay like a home loan etc, how much you seek to invest, what are your financial goals and requirements etc., and then offer a list of funds whose investment objectives match yours closely. If you are young and ready to bear high risk, the planner will suggest sectoral, mid- or small-cap funds. Yet others talk of statistics and risk-adjusted returns, supporting funds with high alpha, beta, Treynor or Sharpe ratios.
Although all these technical information is pretty useful and necessary when it comes to designing an individual’s portfolio, all you need to seek and enquire is, how a particular fund, either suggested by the fund manager or an option researched by you, performed in the bullish as well as in the bearish market. This can clear more than 50% of your hesitation as to whether or not you need to invest in that specific equity Mutual Fund.
There may be no noticeable reason for a reduction in stock price, but it falls due to its high sensitivity to the market. Under such conditions, the fund managers who can shift from stocks to liquid instruments or cash, tend to lose less than the market. Similarly, as the market turns bullish, the fund managers who have the ability to identify undervalued quality stocks gain more than the market.
So, the entire risk bearing or profit accumulating or neutral stand maintaining ability of your fund depends upon the expertise of your fund manager. Make sure to sign up for that fund manager whose investment goals match exactly to your expectation. After all its your hard earned savings invested for which you deserve to earn better profits.