‘Surprisingly even mutual funds are judged by their size, not by their performance’ – why is this so asked a student.
This is a good question – and therefore difficult to answer!
This is like going to a doctor because he drives a Mercedes benz. He earns well is for sure, but does it mean he is a good doctor….well I do not know!
However size has some advantages. AT the very beginning it means you pay lesser asset management charges than a small fund. This is because fund management fee keeps falling after it reaches Rs. 700 crores in a particular scheme.
Also for most people there is comfort in large numbers…something like ‘buy IBM and be safe’. Not sure whether this is a sensible strategy, but it works for many people. After all what works for them is good for them..
I get questions like ‘Please suggest a PSU mutual fund scheme which is doing well’ …I also get requests like ‘please suggest an Indian mutual fund which is doing well’….
Frankly there are good and well performing schemes and poorly performing schemes…do not please get your socialism, communism and patriotism when it comes to your money. Hdfc and Icici are owned upwards of 60% by foreigners. So Hdfc mutual fund by definition is an Indian company (legally) but practically speaking it is a foreign company. Same is true for ICICI…
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