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To Get Caught In Wrong Mutual Funds – Additional Risk For Mutual Fund Investors


As far performance of mutual funds are concerned,generally Best / top mutual funds are always discussed..worst funds are not generally being discussed as much.

If you went to any financial planners blog / website,then you will always find a list of best mutual fund schemes..of course they have their own reasons & need to encourage the investors…if bad plans are discussed more ..then chances are quite high that prospective investors can deviate away from the investing.

But..one can not deny the fact that with growing competition ,investors are facing the additional risk of lagging mutual funds and we will focus few points related to it:

  • If you take view of last few years,number of investors have caught in the infrastructure,power,energy related mutual funds. NAV of all these funds are down in the range of 15-30%..though recently market have touched the highs.
  • One can not blame mutual funds for sectoral funds  but its not only sectoral funds but there are equity diversified funds also which are lagging in terms of returns.
  • There is deficiency of quality fund managers in India.There are more than 40 mutual fund houses & there are number of fund managers who believes in copying the portfolio of the scheme which have offered good returns in the past.
  • There are few examples of higher AUMs where its become difficult to manage the higher level of Asset & it directly affects the fund performance..But still such funds are not interested in barring the inflows.
  • Wrong use of derivatives: As per regulation,use of derivatives is permitted  up to limited extent..but some funds try to play investors money in futures & options & mostly money is lost in F&O..

Table showing comparative returns of worst funds:

Type Of Mutual Fund Category Avg Returns – Last 05 Years Retruns Of Worst Fund – Last 05 Years
Equity – ELSS Tax Planning 3.41% -10%
Equity – MultiCap 4.23 -17%
Equity – International 3% -4%
Equity – Mid Cap & Small Cap 5% -7.50%
Equity – Infrastructure -3% -16.45%

This table gives the idea how some mutual funds have crushed investors money & they have turned into flour mill.

More agony for mutual fund investors is that one can not say when their mutual fund scheme will turned to bad scheme..not even any financial planner can guarantee the same performance in future ..

most of the investors take decision based on the ratings offered by CRISIL or Valueresearch..but till rating is reduced investors should have already lost their money..

When there was a natural upside flow of market with in the period of 2002-2007,each & every fund makes money..but when there was a time to show skills of fund management ..2008 afterwards most of the funds  have failed.

Regulators have improved much more things related to the distribution of mutual funds & do you expect same improvements as far as fund management is concerned…what do you think????


Category: Mutual Funds

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Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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