This discussion is intended to be careful about, while choosing amongst different schemes, but not intended to avoid mutual funds advisor near me investment. As mutual fund advantages over weigh the disadvantages, fund investment is always a good option. It is always a good advice is to do a good homework before investing.
Difficulty in Evaluating Funds
Too many options for the investor, made it difficult to choose from, so many available schemes. An advice needs to be taken anyhow, in order to pick the best one. This is again similar to the situation, when one has to select individual shares and bonds to invest in.
In the case of shares, we can compare P/E Ratios, Sales Growth, Earnings Per Share Etc. of different shares. But in the case of Mutual Funds, there is no such option. ‘NAVs’ or ‘Net Asset Values’ indicate only the total value of fund’s portfolio less liabilities. Hence ‘fund to fund’ comparison is not possible.
Ranks given by Credit Rating Agencies indicate only the past performance, which is not an indicative of the future. That,s why a tag line is always included by the mutual fund descriptions or advertisements that ’Past results are not indicative of the future returns”, which is always true.
In India, AMFI certified Financial Advisors and Distributors are available for the guidance of investors.
Mutual funds advisor near me collect two types of fees from the investors. They are ‘Share Holder Fees’ and ‘Annual Fund Operating Fees’. Share holder’s (in India it is Unit holders) fee is collected as a load at the time of purchase or redemption, and paid directly by the unit holder. But the ‘Annual Fund Operating Fee’ or ‘Investment Management Fee’ is charged and collected annually, which is a percentage of annual holdings and is usually ranges from 1- 3%. What happens if the fund is performing very poorly and the investor is paying his part of obligatory fees annually? Doesn’t it definitely through him into the huge loss? In India, regulators of mutual funds have imposed ceiling on the maximum expenses that can be charged by fund managers to the schemes. This limits the investor’s expense of investing through mutual funds advisor near me.
No Investor’s Choice
If anybody invests individually, there is a chance of building one’s own portfolio, comprising shares, bonds and other securities of their own choice, in order to meet their investment objective. Whereas in mutual funds, this decision is taken by the fund managers. Usually this may be a constraint in case of high net worth individuals and large corporate investors.
Mostly, mutual funds advisor near me try to meet the investor criteria, by offering a large number of schemes with various plans and options, within the same fund. Here investor can choose from different investment schemes/ plans/ options and construct a portfolio to meet his investment objective.
Cash Cash Idle Cash
Daily, there are so many investors who invest in the schemes, as well as others who withdraw their investments. Therefore, funds always should keep a large part of their portfolio as cash, in order to keep up the required level of liquidity. This simply sitting cash also impacts investor returns negatively.