Sunday, February 19, 2012

Investing In Muual Funds - using OLM50 or Value Research

I find a surprisngly large number of people using Value Research or Outlook Money ratings of Mutual Funds to make their investment decisions. This approach is fraught with disaster, especially if your investment horizon is 3-5 years or even more. As a case in point, consider the April 10-23, 2008 issue of Outlook Money where the OLM50 ratings were first published. If you compare these with the current issue (February 22, 2012), you may be surprised to see that out of a total of 49 funds recommended there, only 12 out of 49 funds survive:
(numbers as surviving funds - the funds that are still in the list of recommendations as of today)
Equity Diversified: 3/9
Equity Large Cap: 2/4
Equity MidCap: 0/4
Equity Thematic: 0/5
Sectoral: 0/1
ELSS: 0/2
Balance: 3/5
Equities - Marginal Exposure: 2/8
Equities - Significant Exposure: 2/5
Bond: 0/6

Total: 12/49

So out of 49 funds that were mentioned as "For fresh investments, we suggest you pick up funds from OLM50...(these) we expect would do well in the future." only 12 are investment grade today.

3 comments:

Anonymous said...

WOW, this is defintely an eye opener for me. Thanks

Dr. Jayaraman said...

So, Nitin, I want to keep things simple. How do I invest passively in India? Which is a good low-cost index fund?

Nitin Goyal said...

See this: http://nitnblogs.blogspot.in/2012/03/why-costs-and-tracking-error-are-not.html and also the associated comments.