Which fund to invest?

Recently one Advisor (and his associated fund house) have been pushing me to invest in a fund of funds. I am a little scared about a super supervisor over looking my funds. However Quantum Long Term equity fund was being pushed to  me – really hard to invest in that fund.

I decided to compare 3 funds – large cap biased for sure!

1. Hdfc Top 200                 2. Hdfc Equity fund and                 3. Quantum Long Term Equity fund

and it looked somewhat like this:

Fund Name      6 months           1 year         3 year

H top 200               54.04%                 17.33          15.92

H equity                  52.20%                 13.01           11.67

Quantum                  45.12                      9.54             9.84

I was wondering whether this was just a mathematical accident or a deliberate reason why there was such a big difference. I realised that it could have been caused by 2 things:

Fund manager competence and Fund management expenses. Now fund manager competence is questionable because a fund manager can change jobs. So as an investor I could only concentrate on costs.

That was quite revealing: Top 200 amc costs were 1.89; Hdfc Equity was: 1.86 and Quantum was a whooping 2.49!! (the upper limit by SEBI is 2.50%). So I daresay based on competence and costs it will be difficult – almost impossible for Q to catch up with these 2 schemes – and I picked up only one fund house. I could have picked Prudential Icici, DSP, Templeton…and perhaps come to the same conclusion. Sorry for being the party pooper. I see no reason to pick a fund of funds from …..just anywhere. I would prefer a simple Index fund with 0.5% amc charges or stick to the old foggies.

By the way I also have a fund house presentation saying that the index will reach 21000 by July 2010. From 13000 index today (or thereabouts) it means you will get 64% return. Anybody who is so sure of their prediction should NOT BE IN THE BUSINESS of predicting. They should invest Rs. 1000 crores (with leverage @ 12% interest) earn Rs. 640 crores, pay Rs. 120 crores as interest and put Rs. 520 crores (hey it is tax free) in G secs and retire. Just like that. Simple ain’t it?

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2 Responses to “Which fund to invest?”

  1. Nice! Q fund really pushes it too much saying they are honest. i do not doubt their honesty, but investment based on honesty’s no no :) ?

  2. Agree with K. Should simplicity, smartness, honesty, modesty be left for others to judge? Also why should one go about claiming “I am innocent” – looks suspicious does it not?

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