Are you Mutual Fund Investor? Are you following Fund Managers cautiously along with the funds they manage? Are you switch the funds whenever there is a change in Fund Manager? Read these facts about Fund Managers before you act on your investments.
Let us understand few untold or unshared stories about Fund Managers.
# They need new theme and stories to accumulate AUM
Yes, to be in the market they have to float new stories and new themes. This way they attract new investors. With boring only 5-10 funds how can they accumulate the AUM? How can they sustain in such competitive business?
Therefore, once in a while they come up with the theme or stories to attract and float the new fund offer (NFO). Advisers or middlemen brainwashed with lucrative NFO commission. Finally, scapegoats will be the investors.
Hence, whether it is debt or equity, stick to your basics and never heed to noise created by these fund managers.
# Equities will work in the long run
Yes, definitely and none have the second view on that. However, to sustain in long run as an investor, it needs a tremendous behavior training and mind control.
Sadly your fund manager will not teach you such lessons. Also, they do not define what is the meaning of the long term. Hence, for few investors, it may be 3-4 months, 3-4 years or 10-15 years.
To be a long-term investor, you need the tremendous commitment of not withdrawing money during fall in the market or when you urgently in need of money.
To be a successful long-term investor, you need the money, which you will not touch for LONG TERM. Have patience, understanding which part of compounding formula only under your control.
# Have you heard Fund Managers confession?
Have you heard somewhere that Fund Manager came up and confessed his wrong theme selection, wrong stock selection, wrong entry or understanding the market wrongly?
In my view, they never do that. They have every reason ready to defend of what they did (even if it is wrong). They are also human beings. Doing errors is human nature. What if we assume that during role as our fund managers they never did any mistake? Is it believable?
He also has to undergo the same behavior finance acts like we all the investors. Hence, he might also did some mistakes in managing our money or may be biased towards one sector or stock. However, he never confesses that to the outer world.
# Do they suggest you to exit from equity?
Have you ever heard from Fund Managers suggesting you that you must exit from equity NOW? Exit may be due to your nearing of financial goal or high market valuation.
They never say you exit. However, they defend at each level the growth story of India whether the market PE is at 10 or 100 level. Because at the end they need AUM to run their show. How can they themselves suggest you to exit and reduce the AUM?
# They predict always a POSITIVE story
No matter whether your goal is 2-3-5-10 years, for them it is always a positive equity story and forces you to invest. They never confess that their macro or microeconomic views MAY be wrong. Instead, they talk with confident as if everything is happening as per their term.
Sadly it does not happen in this way. Including the Fund Managers, we all humans. While expecting future scenarios, it may or may not happen. However, they act like GODs who knows everything in advance.
# They defend the expense ratio
Today morning I was reading an article. In that article, they compared the Liquid Funds returns with other Debt Fund types. It was shown that Liquid Funds with less than around 0.2% expenses, generated around same or more return than the other types debt funds during the last period of 1 Yr, 5 Yrs and 10 yrs.
In such a scenario, whether your fund manager will come forward and suggest you to stick to liquid funds only rather than other types of funds? No..Because there may be different fund managers for Liquid Funds to other funds. Hence, how can another debt fund manager suggest you to stick to Liquid Fund managed by some other fund manager of same AMC? At the end they fighting for their supremacy of accumulating high AUM right?
Instead, they defend high expense ratio stating they will generate some alpha. However, results may be different. If that was the case, then Dynamic Bond Funds might be an all-time success story in Mutual Funds industry and why they need a different variety of funds?
These are the few bitter truths which you must digest before investing in Mutual Funds or start following Fund Managers like their fans. Stick to your basics of investments. Mutual Fund Companies, Fund Managers and Advisers need money from you to run their show. Hence, they floated these many 1000+ funds. If they are so caring towards your need, then they might have satisfied with 5-10 funds in each Mutual Fund Companies.
I am not here to give a complete negative image of Fund Managers. However, cautioning few investors who BLINDLY follow Fund Managers rather than chasing their financial goals and expected returns.