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Invest in mutual fund or not ?

Ever since the lockdown has lifted its a million dollar question that everyone is asking, we should analyse the market and then decide.

Analysis

If you have not read my previous article about mutual fund then please read it will help you understand better how mutual fund industry function.
before lockdown that is 24 march mutual industry was doing fine, there was routine subscription in the form of a systematic investment plan(SIP). After the announcement of lockdown, everyone went on a sell spring and the stock market collapsed debt-based mutual fund like Franklin Templeton have to shut their business in India due to losses. The important question is why this happens.


   Only 6-8 mutual fund gives a 2 digit annual return but when you consider the expense ratio the return will decrease  by1-2%. This is the most important reason why everyone is selling their stake in mutual fund and starts trading in the equity cash market.
Subscription of mutual funds has decreased but trading of mutual funds have begun yes trading people are buying different types of mutual fund for a given period and cash their profit.
One more important thing is that even before lockdown mutual funds were giving the same return so we can not blame this one on COVID-19 because there something fundamentally wrong with this industry.
Then comes the inflation rate that is 6% which means the percentage by which our money is depreciating or losing its value. Suppose you get a 10% return and inflation is 6%, the expense ratio is 1.5% and the portfolio turnover is .5% then the effective return is only 2%. which very low.
image 2






we know that why people are not investing mutual funds.
Image 2 is proof that people do not find it attractive any more.
But where does the money go if it's not in mutual fund well because of lockdown many people lost their job many were just sitting idle at home and many saw an opportunity and sold their stake in mutual fund and started trading in the equity cash market.
According to NSE trading volumes have doubled since the 24 March 2020.
this is the reason why markets are so volatile and why it's even riskier to trade because many retail investors speculate on asymmetric information.

Now the million-dollar question is should we invest in a mutual fund or not?
My answer is yes we should invest in the mutual fund.




Mutual funds came into existence because people did not understand the financial market well enough and they are ones who create unnecessary disruptions in the market but if you use the techniques that I have written in the previous then you can find the best mutual fund in the industry.
such as edelweiss gave 94.8% return annually and IIFCL gave 773% return annually.
Not everyone has the time and money trade in the stock market and earn a livelihood but they can have created enormous wealth through mutual fund over a long period.
The most important thing is how you analyse the mutual and select the perfect mutual fund, Use the techniques I have written in the previous article.

because of the rise in speculation in trading SEBI has changed the guidelines on trading,I will be writing about it in the future.

if you want to trade and invest then contact me @8595864379.



Thank you for reading.
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