Let us get the basics right. Really right.

YOU, are the owner. The MUTUAL FUND is the manager.  Read it again. And again. And again.

When you have money to invest, you go to a mutual fund and ask them to invest the money ON YOUR behalf.

What are the assumptions that a MUTUAL FUND makes when you invest are:

– You have Rs. 100 to invest. Out of this YOU know how much is to be invested in cash, debt instruments, and equities. So YOU have chosen to put Rs. 60 in EQUITIES.

-You know that out of this Rs. 60, a portion, say, Rs.40 is to be in large cap, and hence YOU have chosen to invest in Franklin India Blue Chip Fund.

-YOU know that at all points in time this fund will be invested FULLY in EQUITIES.

-YOU know that if YOU change your mind about a) how much money should be in equities b) how much should be in large cap funds, YOU will decide to redeem a part or full from this fund.

-YOU know that if YOU think that there are uncertainties in the market for a SHORT PERIOD, YOU will buy puts on sensex / nifty in order to PROTECT your investments in Franklin India Blue Chip fund.

-YOU will compare FIBC only to the benchmark like Sensex or Nifty because they represent the large cap companies in India.

Thus YOU the investor should realise that you are responsible for asset allocation, market timing (how much to be in cash is market timing), break up of equity into large cap and mid cap, tactical asset allocation, etc.

THE FUND MANAGER’s job is to ensure that in the asset class that he is investing in, he should do an excellent job. Period.

So, when you write in to me, or talk to me, please do not ask me:

– why does a fund manager NOT BUY PUTS and CALLS?

– why is he in cash only to the extent of 5% – other funds have 25% cash?

– why does he not buy mid cap, that is doing well….

hmmm….these are jobs of the OWNER, not of the MANAGER.

I hope YOU understand the role of the fund manager and that of an owner…



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  1. Sir

    What if a fund defined as midcap change its holdings largely reflecting the large cap/nifty and underperform both these indices for a pretty long period…

    Also your comment if a reputed investor turned fund manager who put his majority investment into his fund will you recommend the fund?

  2. exit the fund. He has conviction in neither. Frankly i refuse to recommend any particular fund manager (amc) or a person. I only share what I do….please choose your own poison.

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