Most probably, you now know that there are over 300 equity mutual fund schemes. Some of them have managed to attract the largest investments from you. I call them the popular funds.
Typically, a scheme attracting more assets/investments due to its recent performance ( last 1 year, 3 year or 5 year). That is when the ranking and rating agencies put them up on the pedestal with high star ratings or No. 1 ranks.
Not to forget that even the fund begins chest thumping and lets the world know the champion it is. As a result, investors take notice and pump in more money.
I remember a conversation, from years ago, with a friend, who worked with a Mutual Fund. He mentioned that when the markets are rising the funds don’t need to do anything and when the markets go down, they can’t do anything.
I laughed out when I heard that.
Well, what I realise years later is that the true test of the fund is not as much about how it does in rising markets but how it does when the markets are on a slide.
Interestingly, no fund talks about its worst performance. Of course, it would also be foolish of it to do so!
The fund may not talk but you and I can.
I looked at some of the most popular funds and how they fared in their worst times. This is how I went about it.