Equity trading is one of the fastest way to grow your money. However, the risks associated with trading in stocks is huge and hence diversification of resources is the most popular advice that financial experts give to investors.
Mutual funds are an excellent example of diversification of investments in a way that optimizes returns and minimizes losses. Mutual funds are professionally managed funds that invest into a host of financial instruments.
One of the most important reasons for people preferring mutual funds over trading in stocks is the guidance available via Fund Managers. Instead of taking the trouble of analyzing various stocks and investment options to zero down on the best investment package, customers prefer mutual funds which are available in various types and are professionally managed by Fund Managers.
In a research conducted by Morningstar between years 1990 and 1995, all funds that were doing well kept doing well irrespective of any change in their fund managers while those that were performing poorly continued to do badly regardless of any change in their management.
This outcome does point out that although fund managers are essential to a mutual fund, customers do not need to make investment decisions purely based on them and their performance.
To sum up, there is concrete evidence from the past and for various fund houses, that suggests that the contribution of fund manager to any mutual fund is mostly overestimated and the movement of markets remains the key contributor to the success or failure of a fund scheme.
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