Please throw some light on the methodology adopted by fund managers in the selection of stocks. I want to know how long the top-performing stocks are kept. For example, Page Industries is the top holding of IDFC Premier Equity, so the fund manager will hold onto it for how long? And on this basis, please suggest the three best equity diversified funds.
-Jeetendra
It is very difficult to read a fund manager’s mind as far as stock selection is concerned. The methodology is articulated it in the fund’s strategy statement. For example, IDFC Premier Equity clearly says that it is looking for opportunities that look promising and growth-oriented. And that is what the role of a fund manager is, to invest in stocks that look promising and avoid those that have a poor outlook.
IDFC Premier Equity looks impressive as of now, but we have to keep in mind that a fund manager may not always be right. Furthermore, a mutual fund investor shouldn’t get into this kind of a micro-analysis of a portfolio. It is very difficult to figure out things based on the portfolio. What one should look at is how the fund is doing overall on a defined timeframe. Is it consistent? Is it able to navigate the downturn better than most other funds?
Portfolio break-ups are important to evaluate if the fund is diversified enough and is consistent with its approach. An investor should focus on checking if the fund is diversified and is doing exactly what it is saying it will do.
This article was originally published on February 13, 2012.
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