You may have purchased land, or stocks, based on its popularity or high potential for returns in the preceding months, only to find that your investment loses value after some time. For instance, when Prajakta decided to invest in the stocks of a major private bank, which had experienced a sudden rise in popularity due to high quarterly earnings, she was hoping for solid returns over the next one year. However, she had not researched into other aspects – such as its management’s reputation or outlook and, by the time the year had passed, she noticed her investment had lost about a third of its value.
In another instance, Ankit, a cricket aficionado, prided himself on his ability to predict the performance of key players in the national team. For the opening match of a major series, he was certain that Rohit Sharma would be the star batsman. Ankit’s assumption was based on a very sound fact – after all, Rohit had delivered superlative shots over the last six matches and logic dictated that he would continue with his stellar performance. However, to his utter dismay, Ankit witnessed Rohit getting bowled out at a paltry innings of 10 runs, breaking his trust in the logic of past performance. In cricket, as in investments, past performance should not be the only metric of measurement.
Every good investor boasts about good past returns, be it 15% or beating the index, and with so many mutual funds eligible to invest, the problem of choice is usually resolved on the basis of past returns! As investors, we tend to invest in funds which have been the top performers in various categories, over the last few years, because, like Ankit, we hope that these funds shall continue to perform well!
But is it a reasonable assumption? Data suggests otherwise – for instance, when comparing the top-performing mutual funds, across timeframes, we can see how the top performers do not retain their spot indefinitely. It then becomes evident that past performance does not act as a reliable indicator of future potential.
In this scenario, what should you, as an investor, focus on? You should strive to decode the aspects that will make the fund perform well in the future, including its consistency in the recent past, the fund manager’s expertise at identifying ideas and executing them, the current positioning and valuation of the portfolio, its expense ratio, and the kind of growth rate and profitability expected from the portfolio companies.
Further, just like a child’s character is moulded through multiple corrections, similarly, your investment portfolio also requires continuous monitoring and rebalancing.
Given that historical returns is an imperfect measure while building a portfolio optimised for success, a systematic approach becomes necessary and LadderUp is striving to offer the same through the 1Up MultiManager FOF.
The optimal solution
At 1Up MultiManager FOF, a team of highly qualified researchers, under the watchful eye of one of the most experienced fund managers in India, goes through minute details to identify a set of potential winners. Further, the 1Up MultiManager FOF also employs a highly systematic and disciplined approach for monitoring each investment, ensuring that all non-performers are identified early and replaced with better choices.
In investing, your results speak for themselves – the 1Up MultiManager FOF has delivered 17%, vs 11% of Nifty, 8.6 times in the last 13 years, with 90% of the changes having worked in our favour.
Now, investing doesn’t have to be a game of assumptions.
