From Seattle to Silicon Valley to Austin, a grim new reality is setting in across the tech landscape: a heady, decades-long era of rapid sales gains, boundless jobs growth and ever-soaring stock prices is coming to an end. What’s emerging in its place is an age of diminished expectations marked by job cuts and hiring slowdowns, slashed growth projections and shelved expansion plans. The malaise is damaging employee morale, affecting the industry’s ability to attract talent, and has wide-ranging implications for US economic growth and innovation. An investor should continue to invest in active funds with a good track record. Also, take market exposure through Exchange Traded Funds (ETFs) or passive funds, to reduce the cost of its overall portfolio. We believe, well managed Large-Cap funds will continue to do well. However, it’s becoming difficult for Large-Cap funds to beat the benchmarks as the market evolves across the globe, says Umesh Kumar Daily, Head, ETF Sales, Mira Asset Investment Managers (India) Pvt. Ltd.
“From a broader perspective, Nifty 50 or Sense 30 can be used to get broad-based exposure into sector-agnostic indices. Therefore, an investor needs to create a blended portfolio with active funds along with ETFs so that investors don't run the risk of underperforming the benchmarks significantly,” Daily said during an exclusive session conducted by Economictimes.com in association with Mira Asset Mutual Funds. With actively managed Large-Cap funds struggling with reducing alpha, it’s important for investors to consider a shift from active to passive investment. However, the allocation between active funds and passive funds with Large-cap categories based on indices like Sense or Nifty 50 should be of prime importance. The allocation of assets within categories is an important decision and will depend on an investor’s age, portfolio size that constitutes the risk profile. For young investors, the majority of their investments ought to be in an Index Fund or an ETF. As the portfolio builds up, continue to retain a majority of an Index instruments such as an ETF, feels Ram Kalyan Merry, Founder & CEO, Jams Wealth.
There has been a shift of financial flows from active to passive management globally because of the inability of active managers to outperform their benchmarks consistently. For a long time, India was able to buck this trend but, more recently, things have started to change. If there’s underperformance in a portfolio as compared to the Index, the investor has all the rights to talk about the costing part. Apart from cost, there are other parameters that can evoke investors to look at passive investing. Investors can choose to keep active or passive as their core portfolio and then take a tactical call by investing into ETFs to take exposure into other asset classes like gold or international markets, adds Daily.
Talking about the cost of a portfolio, Merry added: “An investor won’t mind paying a little more in terms of expensive ratio provided the fund performance is good. The actual challenge is in picking the right fund. It’s better to choose funds with consistent returns if you are invested in active funds.”
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