How to Rate Mutual Fund Manager

Posted by somesh mane on October 30th, 2018

Investing your hard-earned money requires careful thought and deliberation. While there are many investment options, mutual funds are gaining notorious popularity among most investors, considering it is a comparatively safer option than directly investing in individual stocks, and the returns (subject to market risks) are higher compared with fixed deposits. Now, before you invest in any of the mutual funds in India, it is important to know the entity who is going to handle your funds - the mutual fund manager. On a daily basis, the fund manager will often be in charge of buying or selling stocks and bonds from the portfolio, taking into consideration the best performing mutual funds. The fund manager can thus be seen as someone who plays a critical role in either making or breaking your investment.

Who is a Fund Manager?

The fund manager looks at optimizing returns, while at the same time, managing risks for the portfolio. The individual pays heed to quantitative parameter like price-to-earnings ratios, dividends, sales and earnings, among other important elements. The manager shall monitor the financial results of the firms that are in the portfolio and its different metrics. He or she shall also decide which of the stocks will be part of the scheme, and accordingly create a portfolio of assets to meet the objective of the mutual fund. Factoring in the role that a fund manager plays in your investment, it is imperative that you take some time to assess the fund manager. Evaluating fund managers is not just a task undertaken by financial planners and distributors, rather you, as a potential investor, is equally responsible for doing the same, as the fund manager will be the individual with whom you are going to trust your hard-earned money. Not knowing how to identify the best-suited fund manager can prove to be a costly affair.

Rating a Fund Manager

As you begin the evaluation process, the first point you need to look into is the performance. Performance needs to be the first measurement you need to consider before investing in any of the mutual funds in India. An excellent fund manager is one who is frequently able to surpass the benchmark index, which is a standard against which most mutual funds are measured. Another essential point you need to look into is how long has a fund manager been handling a particular fund. Generally, the longer a manager's tenure, the more likely it is that the individual are performing at an acceptable level for most investors. You also need to look at whether the manager runs multiple mutual funds in India (including all the best performing mutual funds). If yes, it implies that the manager has enough competence in choosing portfolio investments.

Other essential points you need to regard while rating a fund manager is whether the manager keeps track of the other institutional investors’ dealings i.e. buying and selling of stocks and is he or she able to identify best performing mutual funds in India way ahead of their peers. Factoring in all these points will help you discern between an average fund manager and an excellent one. If you do not have time to spare for assessing a fund manager, you can look for third-party investment information. Websites like Morningstar India have ranked the country’s best fund managers, across different categories. These ratings are based on the fund's past performance, risk and cost-adjusted returns and performance consistency.

As you can see from above, fund managers make up a very crucial aspect of mutual funds. With strong knowledge about the best performing mutual funds in India, they are better at deciding what would be a profitable avenue and what would not be so. Besides the extensive knowledge on the subject and profound insights, fund managers collect invaluable data from their research team. The team would keep a close eye on the shifts in the stock market to study the volume of the shifts. In case of bigger mutual funds, the lead fund manager is usually supported by a team of analysts, traders and other staff who constantly track the markets, make trades and conduct other duties at the fund. All of this is weighed in along with the experience of the fund manager before the investment decisions are made. Now, an essential point to be noted is that while the outcome does point out that fund managers are important to a mutual fund, you do not need to make investment decisions solely on the basis of them and how they have performed in the past. The fund manager is one of the many points you need to regard when investing in any of the mutual funds in India.

All about Mutual Funds

Mutual funds are a very popular form of investment and a preferred investment route for many. Here, funds are collected from several different investors who share a common investment objective, and the fund managers invest them in bonds, equities, money market instruments and/or other securities. The returns generated from the mutual funds in India is distributed proportionately among the investors, after deducting appropriate expenses. Besides the fund managers, the other essentials that you need to look into before investing is the investment objective, past performance of the scheme, per-unit cost of a scheme, the reputation of the fund house and terms and conditions for liquidation. Knowledge about the above-mentioned points will help you determine which would be the best performing mutual funds in India to invest in.

Mutual funds are a suitable option for investors who may do not have large sums of money to invest or those who do not want or lack the time to undertake market research, however, still want their wealth to grow. It is the duty of the fund managers to help identify the best performing mutual funds, and accordingly guide you concerning any queries you may have about parking your funds. The fund managers will invest the collected money keeping in mind the scheme’s stated objective. In exchange for this, the fund house will charge a small fee that gets deducted from the investment. The amount that gets charged as fees is regulated and subject to certain limits, as specified by the regulator for the securities market in the country - Securities and Exchange Board of India.

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somesh mane

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somesh mane
Joined: May 9th, 2018
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