Lies, Damn Lies and Mutual Fund Returns

How many times has this happened to you? You're at a social function and the conversation turns to investing. Pretty soon, people are comparing how well their investments are doing. As you might imagine, being an investment advisor this happens to me a lot. However, I recently had an experience with it that startled me.

Bob, one of the guys I was chatting with at a party, asked what kind of returns I had made for my clients with my methodical no load mutual fund strategy during the past year. I replied that they had unrealized gains of slightly over 29%, after management fees, for the 8 months that we were invested.

Bob countered with a smirk that he had made a 40% return. I raised my eyebrows and told him that was darn good-and suggested that maybe he ought to be managing my money. At that point we were interrupted and, as the evening went on, I began to wonder exactly how Bob had gotten his great return.

I cornered him a little later on and, upon digging a little deeper, the story looked somewhat different. Yes, he had made a 40% return on a mutual fund he had some money invested in, however, we were comparing apples and bananas.

He had a total portfolio of $100k. Being cautious, he had invested only $10k into a mutual fund, from which he profited $4k after he sold it. The balance of his portfolio ($90k) was sitting in a money market fund earning some 0.35% per year.

So, while he had made 40% on 10% of his investment, he had only made 4.35% on his whole portfolio. My methodology was also focused on protecting my clients' investments and it had increased their entire portfolio 29% (unrealized). That would be an apple to apple comparison when measuring my returns against his. Bob's one fund realized 40% return. However, had I approached it the same way Bob had, I could have described one of the funds I used that had realized over 49% for the same period.

Actually, Bob's not-so-good-news story didn't stop there. Bob admitted to having followed the losing Buy and Hope strategy through the bear market of 2000 and had finally sold out at a 50% loss a year ago, before committing $10k to a mutual fund investment.

I was pleased to be able to tell him that my methodology had gotten my clients out of the market before the bear took his big bite, and they suffered only minimal losses before finding safety in money markets accounts. And when my trend tracking figures directed us to move back into the market, they still had most of their money poised to start earning for them again-which it did and very nicely, thank you.

The moral of the story is to look past the surface and don't take any numbers thrown at you at face value. Remember, most people returning from a weekend in Las Vegas will shout about their winnings and mumble about their losses.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com.

[email protected]

In The News:

Mutual funds bet big on these 30 stocks in November; do you own any?  Moneycontrol.comMF industry assets grew to Rs 23.4 lakh crore, on the back of improved inflows into liquid funds and steady equity markets.
Why HDFC Bank stock is among the top picks of mutual funds  Business TodayPrivate sector lender HDFC Bank, the third-largest Indian firm by market capitalisation, is among the favourite stocks in the portfolios of mutual funds. Despite ...
Year-end special: Passive funds outperform actively-managed largecap funds in 2018  Economic TimesYou could very well call 2018 as the year of passive largecap mutual fund. Passively-managed index schemes outperformed the actively-managed schemes in ...
Top 10 wealth creator mutual fund schemes of 2018  Moneycontrol.comThe IT sector has been riding on good earnings show by the IT giants in India. The depreciating rupee is in the last few years boosted the fortunes of the ...
How your mutual funds played the balancing act during stocks crash  Economic TimesBy Bhavana Acharya The last three months has been a bumpy ride for largecap stocks. The year so far has been unkind to the midcap and smallcap set.
Should you shift from large-cap mutual funds to index funds?  Economic TimesThe index fund category of mutual fund schemes is slowly gaining traction among investors. The fortunes of index funds are changing as not only are they being ...
Look which mutual fund categories shone & which ones faded in 2018  Economic TimesTechnology as a category stood out as the only oasis for mutual fund investors this calendar, as it managed to deliver double-digit returns to investors over the ...
Mutual Funds For First Time Manage More Money In Stocks Than Insurers  BloombergQuintMutual funds for the first time manage more money in equities than insurers as the last stock rout erased the gap that started narrowing after demonetisation.
How diversified should a mutual fund be?  LivemintThe extent of diversification is driven by the mutual fund's strategy and the market segment it invests in.
See how they play market crash! MFs sold other stocks to lap up these 21 in October mayhem  Economic TimesPopular beaten-down stocks attracted big money from institutional investors on Dalal Street in October, when the domestic equity market was facing severe ...
When should you sell your mutual fund schemes? - Stocks and equity mutual funds are different  Economic TimesInvesting in an individual stock and equity mutual fund scheme is different. You must look at various parameters like key ratios while investing in a stock. Hence ...
Staggered approach best way to invest in equity mutual funds: Analysts  Economic TimesWith the elections round the corner, wealth managers believe investors should use a staggered approach to invest in equity mutual funds with a large-cap bias.
FIIs, MFs bet on 138 stocks in last 1 year; should you buy?  Moneycontrol.comOut of the 138 stocks which witnessed increase in weightage on a year-on-year basis, as many as 14 stocks saw a correction of 20-80 percent in the last 1 year.
Rakesh Jhunjhunwala`s success mantra: How to make money with Mutual Fund SIP, stock trading  Zee BusinessRakesh Jhunjhunwala's success mantra: Rakesh Jhunjhunwala is an inspiration for all aspiring stock traders or investors. The investment wizard's tips, his ...
Picking the best mutual fund: Are past returns relevant after re-categorisation?  Moneycontrol.comWhile selecting a scheme for investment or while deciding whether to continue with a current investment, a fund's performance track record does play a critical ...
MFs waiting for a fall to buy stocks increase exposure to Nifty futures  Economic TimesFund managers of some large- and multi-cap schemes have been buying the Nifty futures in a bid to boost returns. A look at the factsheets of large fund houses ...
Mutual funds garner Rs 7,985 crore via SIPs in November  Economic TimesNEW DELHI: Retail investors continued to pour money in mutual fundS through systematic investment plans (SIPs) as the industry received Rs 7,985 crore via ...
3 JP Morgan Mutual Funds for Striking Returns - December 18, 2018  Zacks.comBelow we share with you three top-ranked JPMorgan mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy).
Are smart beta mutual funds better than large-cap MFs?  Economic TimesSmart beta funds seeks to enhance returns from the base index by buying a larger proportion of stocks compared to their share in the underlying index.
Is your mutual fund portfolio really diversified?  Moneycontrol.comIf your portfolio consists of equity funds which have similar stock holdings, then it amounts to just duplication and may negate the positive effects of ...
Fidelity Investments Retirement Expert Offers Tip On How Invest In Mutual Funds For Income  Investor's Business DailyFidelity Investments' retirement expert Ken Hevert offers tips on how to use mutual funds to generate a steady flow of income.
When Stocks Are Down: 4 Steps You Can Take Today  ForbesIn my last post, I discussed ways that non-experts can start to take control of their finances when the stock market turns bearish. Today, lets focus on a few simple ...
YES Bank promoters prepay Rs 400 crore loans to Mutual Fund firms: Sources  Economic TimesYes Bank promoter companies today prepaid Rs 400 crore of non-convertible debentures (NCDs) held by two mutual funds. According to ET Now, the promoters ...
What changed for the market while you were sleeping? 10 things to know  Moneycontrol.comA look at cues from market in India and abroad to help you with your trade today.
Record $46 billion pulled from US-based stock funds in a week, according to Lipper  CNBCRecord cash streamed out of U.S.-based stock funds and billions more fled bonds in a week of apparently escalated caution, Lipper data showed on Thursday.
Explained: What is an equity diversified fund and what makes it different?  LivemintAn equity diversified mutual fund is any equity fund which invests across different industries and sectors. While a basic equity fund picks from among all listed ...
Your Guide to Low-Cost Index Funds | Buy and Hold Strategy  U.S. News & World ReportLow-cost index funds have become the prom queens of investing. They're so popular, in fact, Jack Bogle of Vanguard, oft called the father of index funds, ...
CPSE ETF's third fund offer opens on Nov 28; should you invest?  Moneycontrol.comIt is unlikely that CPSE ETFs will outperform Nifty in the long run because of the nature of public sector organisations where it invests.
Amid record outflow for 2018, FIIs lapped up these stocks with both hands  Economic TimesFIIs have so far pulled out Rs 39700 crore from the equity segment.
Buy now to profit from India vote volatility, FundsIndia says  Economic TimesBy Nupur Acharya Now is the time for equity investors to bet on India's election results, even though the polls aren't likely till May, according to FundsIndia.
Stocks could struggle after record outflows, history shows  CNBCInvestors just pulled money out of stocks at a record pace and, if history is any indication, equities could struggle before recovering.
4 types of mutual funds you should include in your portfolio  LivemintThere are some mutual fund categories that walk into most portfolios because they fulfil basic investment needs that people are looking to meet. The recent ...
Insurance sector finds favour with analysts: Should you buy these stocks?  Economic TimesPerformance and financial situations of insurance firms have improved steadily, which explains why analysts are convinced about their long-term potential.
YES Bank shares could witness choppy trade  Economic TimesYES Bank shares could be volatile this week as investors debate about the fate of mutual fund holdings of the debt issued by two promoter companies after the ...
DSP launches Healthcare Fund. Should you invest?  Business TodayDSP Mutual Fund has launched a new fund that will invest in the companies across healthcare sector, including pharma, diagnostics, hospital and insurance.
The Mutual Fund Show: This Asset Manager Topped Crisil’s Ranking And How…  BloombergQuintBased on the performance of asset managers, Crisil ranked 462 funds as of September. Of this, 200 are equity funds, 214 are debt and 48 are hybrid.
Stocks Close at 14-Month Low in Broad Sell-Off: Markets Wrap  BloombergU.S. equity indexes slid to their lowest close in 14 months as investors weighed the impact of the Federal Reserve on growth in an economy already anxious ...
Stock Market Votes With Its Feet  BloombergIn the long run, in the famous formulation of Benjamin Graham, markets are a weighing machine. They respond to the overwhelming weight of evidence coming ...
Rising volatility is slowing outflows from stock pickers’ funds: Goldman Sachs  MarketWatchMutual fund outflows are on pace for their lowest rate since 2014.
Horses for courses: 2 mutual fund portfolios depending on your favourite for Lok Sabha polls  Moneycontrol.comYou could simply go ahead and invest in good quality funds or if you have a strong view on the outcome of the elections, then you can invest in an 'Election ...
U.S. fund investors pull record $46 bln from stocks in latest week -Lipper  Yahoo FinanceInvestors pulled record cash from U.S.-based stock funds and pulled billions more from bonds in a week of escalated caution, Lipper data showed on Thursday.
The 5 Best Stock Funds for Retirement Savers in 2019  Kiplinger's Personal FinanceIt's no coincidence that all the best retirement-focused stock funds for 2019 are centered around value stocks or foreign companies. You'll need to get defensive.
What changed your markets while you were sleeping  Economic TimesLet's check out what might matter to Dalal Street on Monday.
Capital Concierges: How PMSes are wooing richie rich investors  Economic TimesWhen you invest in PMS, securities (shares, debt papers) are held in individual demat accounts.
Stock market to the bulls: This race is in the final laps  MarketWatchRecent sector performance is signaling to investors that this favorable market has entered a late-cycle stage.
Dow dives about 500 points to its lowest close since May  CNBCStocks fell sharply on Friday after weaker-than-expected data in China and Europe exacerbated concerns of a global economic slowdown. The Dow Jones ...
The best way to cut your stock market losses  CNNBy using a strategy known as tax-loss harvesting, investors can sell stocks, bonds, mutual funds or other investments that have lost value and reduce their ...
Stock News: Investors Keen on Shares of Canon, Inc. (NYSE:CAJ) as it Makes Headlines With Moves  The Coin GuildMajor market players are buzzing over Canon, Inc. (NYSE:CAJ) as their share price hit $27.79 at the end of the most recent trading session. Market capitalization ...
A stock market survival course: Part 5  MultiBriefs ExclusiveFor the previous parts of this series: Part 1 | Part 2 | Part 3 | Part 4. This is the final article of a five-part investor's survival course designed to give you essential ...
Reliance Nippon CPSE ETF to open Nov 20, to raise Rs 8,000 crore  Moneycontrol.comThe government will raise Rs 8000 crore through Reliance Nippon CPSE ETF with a greenshoe option to retain Rs 4000 to Rs 6000 crore.
Recent Broker Rating Upgrades Add Luster to These 5 Stocks  Zacks.comSince brokers follow stocks in their coverage minutely, their advice acts as an invaluable guide for investors in their bid to garner the maximum from their ...
Is your mutual fund buying or selling stocks too much?  LivemintHere are equity mutual fund schemes with the highest turnover.
7 stocks most favoured by mutual funds over last one year  Economic TimesAs the markets hit a speed bump, stocks favoured by mutual funds appear to be safer bets.
IDFC Tax Advantage (ELSS) Fund - Regular Plan NAV: IDFC Tax Advantage (ELSS) Fund - Regular Plan-Growth Equity Factsheet  Economic TimesObjective: The scheme seeks to build a diversified portfolio comprising of stocks of companies with strong fundamentals that are available at reasonable ...
An early retiree who interviewed 100 millionaires found many of them built their fortunes using a simple investment strategy championed by Warren Buffett  Business Insider South AfricaJohn of ESI Money spent the past few years interviewing millionaires only to find they use the same investing strategy: low-cost-stock index funds.
With the economy looking shakier, take these 5 financial steps  USA TODAYMany prognosticators see the economy slowing next year. If that happens, it could change your financial focus. Here are some tips to consider.
Fund managers ready to go shopping after sharp correction in stocks  Moneycontrol.comMutual funds that were holding around 8-10 percent cash level in their equity portfolio are likely to purchase shares of companies in banking and financial ...
Why stopping mutual fund SIPs when stock market falls can jeopardise your financial goals  Economic TimesFear has returned to Dalal Street. Caught in a perfect storm of weak macroeconomic numbers, the IL&FS crisis and fear of more defaults, equity markets have ...
New stock ideas boost equity mutual fund portfolios  LivemintIt is imperative for mutual fund houses to beef up their research capabilities, to be able to identify more winning new ideas.
Five stocks that mutual funds think can outperform  Economic TimesA volatile month gave fund managers a chance to cherry-pick stocks.
Mutual funds' exposure to banks hits 3-month low of Rs 1.88 lakh crore in Sept  Economic TimesMutual funds' holding of banking stocks declined by over Rs 21,600 crore to Rs 1.88 lakh crore in September, driven by the correction in equity markets.
Are mid and small-cap mutual funds holding too many illiquid stocks?  Economic TimesLiquidity has been scarce in Indian capital markets in recent weeks. Mutual funds have also not been spared the pain, with liquid and money market funds ...
Small- and mid-cap mutual funds open doors again, but should you invest?  LivemintL&T Emerging Businesses Fund and DSP Small Cap Fund have allowed *fresh* mutual fund investments, taking advantage of a continued correction in small- ...
Shall I buy the HDFC AMC stock or mutual fund?  LivemintThe risk of putting all our money in a few stocks is much higher than investing in mutual funds.
How stocks picked by mutual funds over 2014 to 2017 have performed  Economic TimesWhile the most wanted stocks of 2014 and 2015 have done well, the recent picks have disappointed.
Value focussed MF are cutting their exposure to Indian stocks. What about you?  Moneycontrol.comAs valuations climb, the funds have chosen to stay light on Indian stocks and exposure to bonds and arbitrage has gone up.
Investing in equity mutual funds versus investing in shares: Which is better?  Economic TimesBy Dhirendra Kumar Hopefully, by now my columns have convinced you that most of your long-term investments should be in equity. The next question to be ...
Check out what top five mutual funds bought & sold during October selloff  Economic TimesNEW DELHI: Mutual funds stood resilient as industry's asset base increased to Rs 22.23 lakh crore in October in spite of a heavy correction in the domestic ...
Mutual funds that destroyed most investor wealth in the September selloff  Economic TimesThe recent selloff in the stock market has raised fears of a rush for redemption in mutual funds.​
Mutual fund lesson: What should you do in volatile markets?  Moneycontrol.comCost of investing in equities is that it is a volatile asset class- there will be times when your portfolio value will be lower than what you invested.
Hot and Cold Stocks of Mutual Funds in October 2018  MoneylifeIn October 2018, Axis Bank and ICICI Bank were the most preferred stocks of Indian mutual funds. The net purchases of Axis Bank were Rs1,504 crore, of which ...
Mutual fund holdings in IT stocks touch all-time high  Economic TimesMumbai: Fund managers are betting big on the IT sector, on the back of an improving global macro environment, depreciating rupee and rise in IT spends.
Why your mutual fund earned you less than Nifty in recent market rally  Economic TimesThe more the number of stocks in an index, the weaker is its performance.
These 18 consistent mutual funds may help you to beat stock market volatility  Economic TimesMany equity mutual fund advisors abhor volatility in the stock market. They are always searching for ways to tackle this beast which gives them sleepless nights.
Do not make these 7 mistakes while investing in mutual funds  Moneycontrol.comNever forget that you are investing because you have to achieve your financial goals. Investing without a goal is akin to travelling without a destination.
List of best mutual fund portfolios as per your risk appetite  Moneycontrol.comYou can build a portfolio of mutual fund schemes based on your risk profile.
Is it a good time to invest in small-cap mutual fund schemes?  Economic TimesDespite the slide in the Nifty Smallcap100 index, fund houses seem to be placing faith in small-cap funds again. Should investors take the cue?
Mutual fund managers bought & sold these 20 stocks in May  Moneycontrol.comRelative valuations are attractive and around average, but midcap valuations are still looking stretched despite the recent drawdown, Morgan Stanley said in a ...
Bleeding mutual funds: Should you go back to good old fixed deposits?  Moneycontrol.comAre you worried about the losses on your investments in mutual fund schemes? You are not alone. There are many investors who dumped their good old fixed ...
Some international funds are giving around 40% returns. Should you invest?  Economic TimesInternational mutual funds are topping the return charts. The category has returned around 20 per cent in one year. Should retail investors bet on these schemes ...
Here are top buys and sells by mutual funds in August when Sensex, Nifty hit record highs  Moneycontrol.comAmong largecaps, HDFC AMC, Sun TV Network, TVS Motor, Vedanta and Tech Mahindra topped the August buying list of top 10 mutual fund houses which ...
Investing in mutual funds? Diversify to reduce risks and enhance returns  Moneycontrol.comIn the worst of the times for stock markets, individuals invested across the asset classes are less hit as compared to investors betting all their money on stocks.
Top stocks bought and sold by mutual funds in June 2018  IndiainfolineInvestors should focus on longevity to create wealth. We advise investors to stay invested in those stocks whose growth story is still intact.
How much do mutual fund managers invest in their own schemes?  Moneycontrol.comEver since SEBI mandated mutual fund houses to disclose how much fund managers, directors of the asset management company and other key employees ...
Investing in stocks needs deep understanding of markets  LivemintDirect investing into individual stocks requires deep understanding of the markets and continuous involvement into investing.
Top 10 mutual funds which can double your wealth in long term  The Financial ExpressMutual funds are one of the most popular and smart ways for investors to build wealth over the long term. One can also double one's money, if planned properly.
10 mutual fund options that could be good bets as markets trend higher  Moneycontrol.comInvestment advisors feel this is time for caution and that investors should veer more towards funds with exposure towards large-caps or those that are multi-cap ...
How to Invest in Mutual Funds  The Motley FoolIf you want to understand how to pick the right mutual fund for you, you've come to the right place. In the guide below, I've put together all the major pieces of ...
Mutual Funds Four Strategies For Managing A Portfolio Of Mutual Funds  InvestopediaNow that you've built your portfolio of mutual funds, you need to know how to maintain it. Let's talk about how to manage a mutual-fund portfolio by reviewing four ...
HDFC AMC, Reliance Nippon stocks fall over 9% after Sebi caps expense ratio of mutual funds  Business TodayThe stocks of asset management companies (AMCs) fell in trade today on fears of lower revenues after market regulator Sebi capped expense ratio for mutual ...
5 strategies for investing in mutual fund in the current market to get good returns  Moneycontrol.comMutual fund investing is all about ascertaining your goals and setting out to reach them.
Sebi may tighten liquid MF rules  Economic TimesBy Pavan Burugula & Reena Zachariah The Securities and Exchange Board of India (Sebi) is considering a proposal to tighten rules for liquid mutual funds ...
Fund managers' bets: Top 10 large, mid and small-cap stocks that MFs bought in October  Moneycontrol.comMF industry assets grew to Rs 22.2 lakh crore on the back of improved inflows into equity-oriented and liquid funds.
These 10 stocks make up over one-third of entire mutual fund portfolio in India; check full list  The Financial ExpressEven as Sensex and Nifty continue their strong rally driven by a cheer in blue chip stocks, just 10 top names make up a whopping 34% of the entire mutual fund ...
Domestic mutual funds are selling these smallcaps and midcaps in hordes. Check out why  Economic TimesNEW DELHI: And you thought midcaps and smallcaps have been under pressure over the past three months because of the Sebi reclassification, requiring ...
How to build your mutual fund portfolio from scratch  Moneycontrol.comYou need to know that there is no such thing as a "perfect mutual fund portfolio". There can be numerous reasonably good portfolios, and there's no ...
Top 10 large, mid and smallcap stocks which fund managers bought & sold in September  Moneycontrol.comFears of a liquidity crunch following the IL&FS crisis hit the mutual fund industry in September. Cash plans, or liquid funds, were the worst hit.
5 strategies to adopt while choosing which mutual fund categories to invest  Moneycontrol.comThe decision regarding mutual fund category to invest in would primarily depend upon the investor's risk tolerance and investment horizon.
IL&FS downgrade to hit 35 MF schemes as well  Economic TimesMUMBAI: ICRA has downgraded the debt of IL&FS to a level below that considered investment-grade for mutual funds, putting the spotlight on asset managers ...
New to mutual fund investing? Here are 5 broad options to choose from  Moneycontrol.comWhen the market is more volatile it is advised to invest through mutual funds as they are less risky and gives good returns when invested for a longer term.

Stock Analysis

I receive emails from Morningstar. This company provides statistics and... Read More

Buy and Hold: How to Perpetuate Your Investment Losses

A recent cartoon in my daily newspaper showed two guys... Read More

Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies

Peter is a professional trader, Paul is not. Peter has... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Humpty Dumpty the Stock Market Falls Down

Humpty Dumpty had a great fall and all the King's... Read More

Enronization

Even if you don't own any of their stock or... Read More

Is The Bear In The Cage?

For the last few weeks we have seen the stock... Read More

Can?t Stand The Heat

It seems that every day I turn on the TV... Read More

Attitude Is [Almost] Everything

I often play a little game with myself when I... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

Investing in Stocks and The Game of Monopoly

To begin, you might look at playing the stock market... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

Direction

It is difficult to make money in a bull market,... Read More

Market Timing

Every broker and financial planner will tell you that you... Read More

Enron Cure

Let's hope you did not have any of the Enron... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

China Syndrome

There has been great condemnation recently because China has been... Read More

You Wont Like This

Why? Because I am going to shatter your conventional wisdom... Read More

A Common Misconception about Stock Prices

I cringe every time I hear a novice investor tell... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

Selling Strategies - Setting a Stop Loss

Sometimes the best way of lowering exposure to risk is... Read More