3 Common Strategies for Mutual Fund Management
Once you have made up your mind to invest in a mutual fund and selected the one that suits your needs, your job as an investor does not end there. Richard Cayne of Meyer International mentions that mutual fund investments need to be consistently monitored with a set strategy that leverages your portfolio in a manner that you can extract maximum gains for your savings. When it comes to mutual funds, Richard Cayne of Meyer International explains that there are four common strategies that will help most of you manage your portfolio efficiently.
The most commonly prescribed mutual fund strategy is the buy-and-hold. Richard Cayne of Meyer International explains that the popularity of this strategy lies in the fact that it puts statistics on your side. It has been observed that the market tends to go up 75% of the time and down 25%. This means if you choose to ride the ups and downs of the market gracefully, you will inevitably end up making money 75% of the time. According to Richard Cayne of Meyer International, one of the biggest advantages of this strategy is that it is one of the easiest ones to employ.
The next most commonly used strategy is market-timing. Richard Cayne of Meyer International explains that the main premise of following this strategy is to buy low and sell high. However, it has been observed that investors end up doing the exact opposite because they tend to make emotional decisions or let their fear get the better of them. Richard Cayne of Meyer International advises that in order to make the most of this strategy, one must always take the help of market indicators, since it is not always possible to predict market trends with accuracy.
The last strategy on the list of most common strategies used to manage mutual fund portfolios is the performance-weighing strategy. Richard Cayne of Meyer International explains that this strategy lies somewhere in between the buy-and-hold and market-timing approach. The performance weighing strategy dictates analyzing your portfolio at the end of each year and selling some of the funds that did the best to buy the worst-faring ones on your portfolio. While this strategy may seem to defy logic, it makes sense when you look at the bigger picture. Since the market tends to follow a circular pattern, what goes up today is going to go down tomorrow. Therefore, by investing in the worst-faring ( selectively ) investments, you make sure that you buy extremely low and sell once the investment is at the peak of its cycle. Also, this strategy helps you brace for the time when your top performing fund is going to go through a low phase. However, Richard Cayne of Meyer International warns that this is an over-simplified view of the performance-weighing strategy and must be employed only after talking to an expert.