Many investors display strong emotions whenever a mutual fund or MF asset management company gets into trouble (bond defaults, redemption pressure, front running, etc.).
One group blames the AMC, the regulator, and finfluencers and goes into “I want my money back mode” Another group attacks those who are critical of the AMC under pressure and says they “believe” the AMC will turn it around.
I think both types stands are wrong. We should not get emotionally attached to our investments (MF or any other). Even when there is no trouble, investors form unsubstantiated opinions about the AMCs “integrity” and “trust”. When the going is good, everthing or everyone seems trustworthy. So it makes no sense to become an AMC fanboy.
Yes, it is okay to prefer one AMC over the other with the understanding that it is a subjective choice. But it should also be a reasonable choice.
- Choosing a fund by just looking at trailing returns (last 1Y, 3Y, 5Y, 10Y etc.) is a terrible idea.
- What is worse is to assume such high returns will always persist. It will not. It cannot!
Inspite of all the evidence in favour of passive funds – Watch my talk on active vs passive investing in India – if you still wish to pick or stay invested in active funds, then toned down expectations and a sense of equanimity are essential.
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If things turn sour, you shrug, stay invested or pull out or push further inevstments to a new AMC and move on. There is plenty of room for error and live and learn in the capital markets and there is no place for regret. It is a waste of time. There is no need to defend your decision to anyone else including yourself. Mistakes happen. Fretting about it is the bigger mistake. So you move on.
To suceed, we must behave like professional fund managers of our dreams and goals.