Consider this: Out of the available 325 equity funds, there are only four funds that have beaten Nifty Index for the last six years continuously. These funds account for just 4% of industry equity assets – our money.
In the past five years, there are only five funds that have beaten the Nifty Index continuously. These funds manage only 7% of our equity corpus.
By reducing the time frame to three years, the numbers improve but far from desirable. In the last three years, there are 18 funds that have beaten the Nifty Index continuously. These funds manage 13% of our money allocated to equities.
This is where manager selection becomes important. One would rather be in that 4% or 7% figure and not figure among those who did not make money work for them.
While selecting funds from the existing basket is itself ominous task, but people still go for New Fund Offerings (NFOs). 15% of our money is with funds that have an history of less than 3 years. Analysis of the 17 funds launched in 2007, one would decipher that only eight funds have beaten Nifty Index in both 2008 & 2009. This is a hit rate of less than 50%. It is always better to wait for a fund to complete three years before deciding to jump on the band wagon.
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