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  • Category: Mutual Funds

    Is it a good idea to own the portfolio of stocks owned by best performing mutual fund?


    Have a query about owning stocks? Wondering if it is owrth holding stock of the best performing mutual funds? On this Ask Expert page, get financial and investment related advice to your queries.

    Stock selection is a difficult task even for experts. Everyone will suggest us to buy mutual funds if we don't have proper idea of selecting stocks. But to gain knowledge in share market, instead of buying mutual funds, is it proper to mimic the fund manager of a best performing mutual fund? I mean, is it a good idea to own the portfolio of stocks owned by best performing mutual fund?
  • #145350
    I feel it is good. But while choosing you should go for a well forming company. There are many financial advisers available in the market. Karvy is one such company. There are many other such companies. They will manage the mutual funds on your behalf and good returns can be expected. You better contact a manager for Karvy or similar company for you to get help. Now some insurance companies are also offering these services wherein you have good returns and also your life coverage. Kotak is one such company. You van also contact them for service.
    drrao
    always confident

  • #145363
    It is not advisable to follow this strategy as high rated funds may have some invisible flaws attached.So it is not a good idea to own the portfolio of stocks owned by best performing mutual fund.if you want this strategy to work, you have to go to each fund's annual reports or KIM to see for composition & make a lot of research to pick some of them.

  • #145364
    An excellent but logical question! But I am afraid that the answer is very complex. So far as equities (stocks) are concerned, please note that not only quality of the stocks, but also timing is important. Fund managers make different mathematical and statistical models employing various tools for fundamental analysis (to judge the quality of stocks) and technical analysis (for determining appropriate time to purchase and sell).

    Generally it has been seen that the value of a script increases after bulk purchase (usually by mutual fund managers) and rapidly goes down after bulk sell (again by mutual fund managers). So if you follow the mutual fund managers and buy a particular stock, you will purchase it at a much higher price than the price earlier paid by the fund managers. Similarly, you will sell a stock (following the managers) at a much lower price. So, your profit margin (if any) would be much less than the profit made by professional fund manager, although you are following the manager in respect of choosing script, buying the script and selling it.

    So, it is not prudent to follow mutual fund managers to buy stocks.

    Caution: Explosive. Handle with care.

  • #145377
    Simply mimicking will not be useful as the churning of stocks by fund managers is a complex issue. Some of those stocks may be performing very well but others may be not upto that level.
    Selection of stocks is based on the strong fundamentals and good prospects of the company rather then arbitrarily copying the successful fund stocks.
    These things are dynamic in nature and what seems today very very successful may not be so in future. So it is better to select stocks based on their individual analysis.

    Thoughts exchanged is knowledge gained.

  • #145382
    A fund manager is one who has the qualification,expertise, and experience in the field of portfolio management and fund management. He has the support of the fund house in the form of laid down discretion powers and outlay of funds. He has with him more tools for evaluation and analysis and projection. Hence he will take calculated risks and will withdraw or exit when his target is achieved or he senses extra risk. He may also inest more when he sees an opportunity.

    This flexibility and expertise is not available to individual investors. They may no be experts also. So by the time we enter, the opportunity would have become stale or risk would have started. We may be getting outdated information and due to that our decision may be faulty.

    However if one is an experienced and expert and has tools,then one can take cues and act accordingly.

  • #145397
    If a mutual fund is doing well there are many reasons behind that and it is not easy to pinpoint it's success to one single point. The selection of stocks in a fund is done by experienced fund managers for maximising the return on investment. The fund managers take lot of actions during the ups and downs of the market and try to foresee the market movement with great skill required in this difficult terrain.

    Now if we simply choose those stocks in our portfolio we may not be able to get same kind of return so simply mimicking them is not a good strategy.

    Knowledge is power.


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