If there are 800 stocks in the BSE (and 30 blue chips which represent BSE, 50 which represent the Nifty and only 100 in the A category) there are more than a 1000 financial schemes which help me pick that one stock which will pay off for my child’s education.
Simple statistics tell me that I am many times more likely to pick the best stock rather the pick the best mutual fund/financial instrument.
Another thing I hate about mutual funds is that they are advertisement driven. Some of the best and undervalued instruments like Index Funds, closed ended Mutual funds (which trade at 20% discount) are never talked about because they do not pay the journalists.
3rdly I feel the entry/exit load (1.5%), the Asset Management fees (2.5% p.a.) are too high.
4thly All mutual funds advertise their fancy investment ideas, but ultimately boil down to a strong correlation with the sensex. When markets fall they bleed, when they rise they mint gold. I am yet to find even a single sectorial or niche fund (with an investment of >100cr) which has beated the Sensex consistently for over 5years.
Also there are some ridiculous concepts creeping up
1. Basket of Funds:
If your mutual fund is not doing good enough then pay to another manager who will manage him… Just like Inspector raj one inspector to oversee the working of another.
Why Mutual fund:
1.Fund Manager for the poor:
Not everyone has the risk appetite or the knowledge or time to sit with charts projections and derive an investment strategy.
Minimizes the risks shock and the gambling tendency.
You just have to identify the sector which looks attractive and leave the micro-management to the experts.
Long term capital investment and dividends from MF is tax free.
ELSS (equity linked savings scheme) SIP (systematic investment plan) gives you good tax shield.