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Should I look at the holdings of a mutual fund before I invest in it?

Mutual funds invest in stocks and that is the most important thing - as a small investor, should I look at the holdings of a mutual fund?

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4 Approved Answers

Ritika

Yes definitely you should look into the holdings of the fund before investing n the mutual funds.

Looking into the mutual funds you get to know a lot of things:

1) Deciding the rate of returns: how is the fund performing, its past year records?

2) Have a look at the % of holdings: By looking at the distribution of % to various holdings you get to know which sectors is the fund investing in and how are these sectors performing (based on market data)

3) Final Word: After all the analysis, of market data and also the amount of risk you want to take you should decide on the investment you need to make.

Following is the link of few funds which give detailed description of their holdings :

Hope this answers your question.

Kavita Soni

Yes of course, you should look at the holdings or securities of a mutual fund before you plan to invest in it for:

  • You will not want to invest a holding or a sector which is under-performing since years
  • There may be frequent changes in returns of a holding due to changing economic environment
  • Holding category average returns are not fairly consistent over the years - at time too high and at other too low

Now the question is should you consider looking at holdings only at the time of investment? Well no, the process of reviewing continues even after the start of investment but it should not be a detailed one. For example, if the portfolio covers large cap, mid cap and small cap funds, you should not review large cap funds quite often as you should review mid and small cap ones because large cap funds are quite stable in their performance and you can rely on your fund manager for their returns.

Your reviews should include questions to self like:

  • What is the reason of under performance of a holding?
  • What is the benchmark return in the market of a particular holding?
  • Is the holding risk profile changed? (low to high or high to low)
  • What if I change the investment amount in under-performing holdings?

These questions will give you a comprehensive idea about the expected returns and you will then just not rely on hopes that market promises to you.

You might like to look at other factors before you plan out your investment.

aniket

Mutual funds essentially collect money from a pool of investors and invest them across a range of securities - be it debt or equity. In simple terms imagine a box of assorted chocolates. Each chocolate within the box represents a stock or bond and the box which is in essence a collection of all the different types of chocolates represents the mutual fund.

Analyzing these holdings is something that every fund manager does. One of the key benefits of investing in mutual funds is that the fund manager takes care of your money and actively analyzes which securities to buy, hold or sell. This helps the investor to a great extent as not all investors are as skilled and adept at fundamental and technical analysis. Therefore, it is not necessary for an investor to look at the holdings of the mutual fund, as long as the objective of such investment is clear between the investor and the fund house.

Having said that, while buying a car an investor is more likely than not to check the interiors of a car. The holdings of a mutual fund tell you the same information about the mutual fund and you can take an informed decision as to whether you should invest in it, depending upon your financial objective.

It is a sign of prudence to check the holdings of your fund before investing in it, but the fund manager will revise the holdings from time to time based upon his knowledge and analysis. It is best to rely on his expert knowledge.

Ankit

Holding of a Mutual Fund is a very important criterion that investors should look into before investing.

Big investors who invest in mutual funds and keep a regular track of their portfolio look at the holdings of the mutual fund before investing in it. These investors are very professional and also keep a track of changes in the holding of a mutual fund, accordingly decide whether they would like to continue investing in the fund or withdraw the investments.

Small investors generally do not keep a track of holdings, but it is a good thing to track the holdings.

Following are the advantages of keeping a track of holdings before investing:

·     Shows the proportion of investment made in debt and equity

·     Shows the proportion of investment made in large cap, mid cap and small cap.

·     Shows the scrips of companies invested in.

·     Shows the exposure to different sectors.

It is a good thing to be a professional and decide for ourselves where to invest in, by checking the holdings of mutual funds before investing.

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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