Thread: Another better reason to invest via MFs

The key to make money in the stock market is to diversify and spread your risks. As they say, "Never put all your eggs in one basket".

The Sensex or Nifty is a good indicator of the stock market but since it is a sample of the top shares, it is not completely accurate. For example, today the market behaviour was as follows:

Sensex
15008.68 137.78 (0.93%)
Nifty
4572.65 41.95 (0.93%)
CNX Midcap
5704.05 113.65 (2.03%)
BSE Smallcap
6525.19 140.27 (2.2%)

As you can see that the Sensex and Nifty rose by 0.93% whereas the MidCap and SmallCaps did much better at 2+%.

Most Mutual Funds don't just invest in Blue chip companies (some do). They invest in a variety of stocks. Hence it is possible to do better than the stock market by way of Mutual funds.

I have been doing some analysis. And I am seeing a pattern:

a) Sundaram Select Midcap - RP (Growth) is doing really well at the moment
Absolute Returns (as on Jun-03-2009)
1 mth = 52.49%
3 mths = 108.18%
6 mths = 80.71
1 year = 7.12%

b) HDFC Equity Fund (Growth) is not bad either:
Absolute Returns (as on Jun-03-2009)1 mth = 30.29%
3 mths = 84.24%
6 mths = 66.65%
1 year = 6.22%

c) Franklin India Prima Fund (Growth) is also close behind:
Absolute Returns (as on Jun-03-2009)
1 mth = 38.34%
3 mths = 84.44%
6 mths = 65.46%
1 year = -6.11%

Once more, I am not recommending anything. I am just showing the power of mutual funds.

As I expected, I am not seeing any comments on this thread.

Originally Posted by just4kix

As I expected, I am not seeing any comments on this thread.

I read all these threads by you. But to be honest, I know almost nothing to comment about this.

Reps+

You could ask questions then.

Hi
Just from my own experience, i have invested in Mutual funds (7-8) and stocks (shares) in the mnth of Jan 2007 (i think...don't remember) when sensex was at 18000....(what a bad move...phew), now am at a loss of approx 10,000 on each MF, while in shares (stocks) am at a profit in 3 scripts out of 9 scripts.

Some of these MF Houses, sit on the money waiting for the right time when it is low, and what happens......the market goes up and they have missed the bus....it goes up still further like now....and the fund managers are under pressure to invest and get returns....but the market is too high by than and it is not favorable for investment.....

So for me....atleast the scripts i have i can monitor myself and the moment i make a target profit which i have fixed for myself...i get out.

MFs you leave it in somebody else's hand which i have also done (wrong move) in Jan 2007.
Get to know your scripts, follow whatever method u want...the fundamental or technical, just dont leave money in anybody else's hand or you will be at losses as myself. I know that at some time the MFs which i am at a loss will go into the profit...but have to wait till that time and also as an after thought if you have to invest in MF, the best option is to go for SIP, as it averages out (meaning one moment you may invest when the NAV is a little high and the next time when it is low, so you get an average...better than investing one shot in a lumpsump)
My experience...hope it helps.

Hi
I invest directly in the market. I did look at the MF's one time, and here's what i know.

I didn't find any MF which was actually able to outperform the market index in long term.
The reason i'm looking long term is because MF investors generally have log term view(2-3 years). Moreover there is always an entry load and sometimes an exit load. There are also a few more charges that u need to pay annually.

So in the end you end up paying a good amount for the services of a fund manager who is not able to outperform the market which makes no sense as you can simply buy index funds like nifty bees.

The best part is that you can sell you stake whenever you want unlike MF's which might have a lock period.

So i don't see any point in paying for fund managers who cannot outperform the market in long term, so whats the point in investing in them, just go and buy index funds instead. You are in control of your money which is much better.

For measuring fund performance always normalize/compare them with the index and you wont find any fund that actually outperforms the market.
Any fund giving less than 15% annual returns is of no use as you are much better of putting that money in a bank which is risk free investment.

^^ Agreed to some extent.

But ordinary users cannot keep track of movements. Also investing in blue chip stocks requires a lot of money. For example, if RIL share is trading at rs. 2000, you can buy only 2 shares with Rs. 4000. Whereas with MFs it is possible to buy units that are spread across the spectrum.

Most MFs are open ended - so you are not really locked; you just have to choose open ended schemes. And now SEBI is doing away with the entry and exit loads.

MFs never promise more than the index. Anyone who believes that MFs will give better results than direct investments is fooling himself. It is a widely known fact:

• Direct equity investments = maximum returns, maximum risk
• Investment via MFs = medium returns, medium risk
• Investment in Debt market = low returns, low risk

Besides the index is composed of the top-30 (Sensex) or top 100 (Nifty) or such. It is not the true value of the market and it should not be. Since the index is represetative of the select group of companies, an MF will never be able to match it - because MFs SPREAD THE RISK.

Ultimately it all depends on how market savvy you are and how deep are your pockets plus your risk taking appetite.