How to Choose Mutual Funds for Yourself? Blog / By Imperial Money / July 31, 2020 / Mutual Fund Indian mutual fund market is o ff ering 1000 plus equity and debt funds which are open- ended in nature, further than 51 asset management companies selecting the right funds for self and it includes so many parameters having so much of technical and fundamental aspects of those funds & then to choose it whether it suits you or not can be an enormous job. Investors who don ’ t recognize the complexities of various fund style, tactic, and risk management, seek nowadays online guidance to get the correct answer to in fl uence their economic aims, one such way is looking at the rating which in my mind is not less than Rudali of fund management industry, Thus investors need to select schemes after examining the pros and cons of each fund category, the schemes, long term, and short term attribute along with liquidity and what kind of time horizon investor is carrying with objective and the objective of the fund whether it matches or not. Imperial Money is bringing here for you how you go about selecting the right funds for your investments, please remember that asset allocation is the most important aspect when you Archives September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 December 2021 November 2021 October 2021 September 2021 July 2021 June 2021 May 2021 April 2021 February 2021 November 2020 October 2020 September 2020 August 2020 Search ... CLIENT LOGIN Home About Us Services MF Tools Research Blog Contact Us design the portfolio, here ’ s a look at the most important fi lters they apply while choosing funds. ASSET MANAGEMENT COMPANY (AMC) While outperformance from the standard is signi fi cant, some investors are also keeping a close eye on the pedigree of the fund house. “ Imperial Finsol normally take a top-down tactic. To start with, IFPL looks at the fund house pedigree. Whether the fund house is acting in investor interest or not? Is it complying with all regulations? In the last 4 years, we imperial did not work with 2 or else 3 fund houses purposely looking into their portfolio style and it pays a lot to us. The ownership of the fund house also matters. It should have stable management. When it comes to choosing funds, IFPL looks at the risk-adjusted performance in equity funds. Beta is also an important parameter. We look at consistent performance. Strong Base We at IFPL (IMPERIAL FINSOL PVT.LTD.) strongly believe that the process is more important than having any star fund manager. If he quits then it ’ s seen in the industry that funds get badly impacted, so is the fund house capable of managing the funds well? To address this aspect we need to make sure that the fund house has a good processed driven and fundamentally strong team, recently one of the big fund houses has 2 big names exited, however, the performance of the funds has not impacted however it has been outperformed the peers, this has because of a de fi ned fund management process, supported by experienced analysts and senior fund managers. Risk management is top Priority Most mutual fund houses have a dedicated risk management team that operates independently of the fund management team. This team is responsible for putting in place a proper risk management framework and ensure the fund management team operates within these boundaries. Such processes have become extremely important in the light of recent downgrade/credit episodes. Recently in few credit events of few fund houses have done extremely well and a few were the laggard so this is one of the most important criteria when you choose the fund for yourself. Safety First The credit events in the fi xed income space have brought forth the importance of liquidity risk and credit risk in debt funds, which have been pushed debt funds as an alternative to FD ’ s. Several investors are now trying to invest in mostly safe categories of funds like liquid, overnight, and arbitrage. They are of the view that they might take the risk with equity funds and use debt funds to protect capital. Retail investors look for debt funds for margin of safety. Retail investors still didn ’ t digest that even in debt fund can give negative returns and the Franklin event has shaken up the entire industry that scheme can get closed as well and the fund will get lock-in as well for some time unless the resolution is not getting in place. July 2020 June 2020 March 2020 February 2020 January 2020 December 2019 October 2019 September 2019 November 2018 July 2018 Recent Posts How to Select Mutual Funds if You are a Beginner 5 Biggest Financial Mistakes Young Parents Make 5 Bad Habits You Need To Change To Improve Your Finances. Power of Compounding in Mutual Fund 10 Investing Mistakes That May Damage Your Wealth Debt funds that have a conservative approach towards managing their debt portfolios and have a predictable style and clear thought process. Some other factors are fund size, vintage, percentage of allocation in securities, segment which is liquid & attentiveness risks within funds ’ portfolio (to instruments and issuers), expense trends, etc. ” Values & Principles by Ethics Honesty is the most di ffi cult aspect to fi nd in the world. Besides fund performance and processes, Investors are becoming increasingly conscious of avoiding AMCs that are too focused on increasing their bottom-line at the cost of investors. fund house delicacies its investors. Is it reducing the total expense ratio (TER) where performance is hard to come by? Some fund houses ask investors to lower their return expectations. As few AMC ’ s are listed now so they have margin pressure on them to increase their pro fi ts than the returns of the investors, but they don ’ t reduce TER if the performance is slipping. Please escape such AMCs. The most Important Agenda is Portfolio The past performance of an equity fund does not guarantee future returns. We track the portfolio of the funds very consistently and we have in house system of cross verifying the funds and funds portfolio with communication of fund manager and in our view, most of the fund those who get a high rating, won ’ t sustain long run with that rating, instead, we analyze the current portfolio of funds and the thought process of a fund manager. “ Since we have experience in analyzing companies and managing our Broking business too and equity portfolios, IFPL look at the current portfolio of any fund. This gives an idea of how a fund is positioned to bene fi t in the future. Past performance does not matter to us because it cannot be repeated in the future, and we strongly recommend that do not come into a trap of rating the fund as you may not even know how they got this rating. Who Runs Fast, Elephant, or Horse? Fund leaders frequently say that fund size is not a chief factor of presentation; however, our fi nding is opposite to this thought. Especially when the scheme size becomes large, we avoid funds that are too large. For instance, in Multi cap we invest only in the funds which are anything in between 1000 to 3500 cr., in small and mid-cap, we avoid funds with AUM of more than 2000 crore. In mid-caps, the upper threshold is Rs 2,000 crore and in large caps we avoid schemes having AUM of more than Rs 5,000 crore. We have done an internal study of fund returns over 20 years which shows that smaller-sized funds have delivered better than large-sized funds, even where the fund manager is the same. We don ’ t exit funds that go beyond this AUM upper limit; we don ’ t add more allocation to such funds. Thus, the fund size has to be not too small and too large either. ” Is that fund getting a regular inflow of Money? A good fund will attract in fl ows while a bad fund will see investors exiting. So, funds that get consistent in fl ows indicate that investors have a conviction on the fund manager philosophy and framework. “ The fund should be getting regular in fl ows even if the in fl ows are small. This helps the fund manager look for new opportunities as well as the buying good quality stocks at lower levels by which he can add more value to the Funds. When the fund sees the out fl ow it dents the overall performance of the fund and the manager has to sell good liquid stocks at a cheap price and give money back to investors. New fund suggestions remain reasonable Afterward SEBI ’ s recategorization standards, there has been a considerable reduction in new fund o ff ers. But are all new fund launches bad? “ We don ’ t mind recommending NFO if the concept is novel, unique and valuer proposition is good looking into the market scenario. The portfolio is good and if it comes from a fund house with is known for its performance then it makes investors more comfortable. Is fund manager most Important? Mostly before I meet with the fund manager, I ask him about the fund style, Proposition, sectors which he is bullish for 3 years down, and how dynamically he will be managing the fund. Whether it is a concentrated approach or more diversi fi ed across sectors and most importantly what are the overall earnings of the portfolio with a conservative or aggressive approach. We try to know the past track record along with his character and thought process. We believe that manager should be dependable and trustworthy even nevertheless he may not be the most popular fund manager. When to say goodbye to fund? No fund can live up to its hopes forever. While short-term de fi cit can be ignored, steady loss for a continued period is a clear red fl ag. If the fund is not undertaking thriving, it is advisable to monitor the performance for a year time and if doesn ’ t recover, we believe it is superlative to depart or halt allocating fresh money to such funds. Just before wrapping up, picking the correct fund for your client is an art & science both. Investors must concentrate on both quanti fi able and qualitative reasons while zeroing in on the ideal outlines for self. Happy Investing!!! IMPERIAL MONEY Contact Us : 8446686863, 9595889988 Email Us: wecare@imperial fi n.com Follow Us: https://www.facebook.com/imperial fi n/ Follow US: https://in.linkedin.com/company/imperialmoney Subscribe to YouTube Channel: https://www.youtube.com/c/IMPERIALMONEY ← Previous Post Next Post → A company with high customer satisfaction rate since mid 2011, Imperial Money had engaged in providing comprehensive Financial distribution services to individuals. We help you to make smart investment choices with your money to get optimum returns. Quick Links Client Login MF Tools Downloads Blog Market Updates Financial Calculators Our Services Tax Savings Mutual Funds Insurance Equity Investment Get In Touch 302, Royal Vista, Opp. Dhantoli Garden Main Gate, Dhantoli, Nagpur - 440012 (+91) 9595 8899 88 (0712) 2454477 wecare@imperial fi n.com Imperial Money Pvt. Ltd. makes no warranties or representations, express or implied, on products o ff ered through the platform. It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services. Unless otherwise speci fi ed, all returns, expense ratio, NAV, etc are historical and for illustrative purposes only. Future will vary greatly and depends on personal and market circumstances. The information provided by our blog is educational only and is not investment or tax advice. Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing. Past performance of the schemes is neither an indicator nor a guarantee of future performance. Terms and conditions of the website/app are applicable. Privacy policy of the website is applicable. Copyright 2021 IMPERIAL MONEY Disclaimer | Disclosure | Privacy Policy | T & C.