A mutual fund is a set of securities that are managed by a
finance expert professionally. Due to several advantages, from diversification
to expert management, mutual funds are a favored investment type amongst all
classes of investors. However, while selecting the best mutual fund, several
investors miss out on a significant decision they should be making – selecting
the best fund manager.
Global VentureManagement believes that a fund manager ultimately decides what stays in
the mutual fund investment. This decision can influence the overall returns of
the mutual fund considerably. With their experience, investing style, and
research at their hand, they have total control over the corpus and its ability
to make lasting wealth.
After filtering out fund managers on the basis of their
qualifications and experience, we come to the most significant feature of a
fund manager, their investment style. The way a fund manager invests can be divided
into several types of styles. Each style serves a certain risk appetite and
fits best for a certain point in the economic cycle of the stock market. Broadly,
fund management styles are of three major kinds –Value, Growth, and Growth At
Reasonable Price (GARP).
- Value Style
This style of investing derives profit by investing in
undervalued securities. Fund managers who work in this style buy
undervalued equity at lower prices, and then hold them till they reach their
peak price. This style works on the idea that security can be undervalued for
several reasons other than cost, and thus, they have the prospective to reach a
new high. That growth is what the fund manager takes advantage from. The value
style makes up for what the expansion style lacks – the system works best in
the bearish stage of the stock market, while it can also work perfectly in
other phases of the market.
- Growth Style
As the name says, fund managers which invest with a growth
style tend to invest according to the growth potential of the security, which
they trait to the current and future corporate earnings. These managers select
to pay attention on companies that are leaders in the sectors they function,
with high retained earnings which point out more prospective for growth.
This style is ideal for when the market enters a buoyant
phase, as these successful stocks do even better in this stage. However, it is hard
for the manager to maintain returns at the time of a descending spiral in the
economy when the condition is unwelcoming for all stocks.
- Growth At Reasonable Price
(GARP)
The GARP style is a blend of the value and growth
style.
A fund manager following the GARP style will invest the
corpus in a limited number of securities, which have given reliable
returns. Rather than picking stocks from a benchmark index, the manager
shuffles amid varied stocks from different sectors, to take benefit of the
growth happening in the sectors as per the present stock market situation.
Global VentureManagement thinks selecting a good blend of fund management styles, by selecting
the most appropriate fund manager, can make sure that an investor’s corpus can offer
maximum profits as per the circumstances at hand.
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