This is one aspect of wealth management which I have always struggled with. And specially since clients expect you to know which schemes will perform better than the rest.
Just last week, I was helping a close relative to consolidate all his equity investments. His investments were spread over 20 odd schemes and all were in regular plan. I made him open online accounts with 5 large AMCs and we are now in the process of consolidating all his investments (under direct plans).
With him, I could take the liberty of selecting the schemes I have invested in. And my approach is pretty straightforward – I have picked 3 AMCs for their Flexi plans and 2 AMCs for their Index funds – one which tracks the Nifty and one which tracks the mid-cap Index.
For the actively-managed portfolio, I feel I’d much rather let the AMC and the fund management team decide how they wish to manage the funds – both from a market cap bias and from a sectoral bias. Why should I impose my views / biases (i.e. if I had one)?
Left to me, I would follow the same approach for clients as well. As when I start deciding on market cap / sectoral biases, I move from being a wealth manager to a fund manager. I’d rather focus on what really makes the big difference viz. helping clients arrive at their asset allocation.
To add to the confusion, every day one hears of further innovation. Last month a fund house came out with a Mid Cap Quality Index fund. There are many such index funds now available and there will be more which will follow. Each (as per the AMC) has beaten the index in the long term. There is even a name given to this style of investing – factor based investing.
I will be very interested in knowing how you approach this part of the puzzle? Would love to hear from you
