Kotak Mutual Fund is doing a great job of helping its investors make money, even though there are some tough rules they have to follow. Nilesh Shah, the head of Kotak Mutual Fund, says that their success is like a runner who is held back while still expected to win the race.
Here are some challenges that Kotak Mutual Fund faces:
Cash Availability: The fund keeps some cash on hand to give investors easy access to their money every day. This cash can slow down returns by about 0.5% to 1%.
Stock Limits: If a stock gets too popular and its share in the index goes above 10%, funds like Kotak have to sell some of it. This can make it harder for them to keep up with the index.
Trading Costs: The fund has to buy and sell stocks at certain prices, which can cost money and affect performance.
Expense Comparison: When comparing how good their performance is, Kotak has to subtract costs from their returns, while indexes don’t have to. This makes it seem like the fund isn’t doing as well.
Despite these challenges, Kotak Mutual Fund has consistently performed better than the market index over different periods, like 3, 5, 7, and 10 years.
Nilesh Shah also pointed out something interesting. People often say that fund managers have trouble beating the index. First, they said that big fund managers couldn’t do it, then they said it had to do with smaller fund managers. Now, they are even questioning their performance over five years! Nilesh wonders what critics will say next.
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