Question

With the use of empirical evidence evaluate the performance of mutual funds

Answer 1

Mutual fund industry is highly growing industry because it is offering the investors with an alternate form of investment other than traditional methods like banks and gold and managing own securities.

Mutual fund is providing chance to the investors in order to grow their money by transferring their risk to a a group of of a specialised professionals in management of his portfolio so that he can maximize rate of return by payment of a commission.

When evaluating the returns of the mutual fund according to the empirical evidences , firstly we have to categorise the mutual funds under active mutual funds and passive Mutual Funds so, Active Mutual Funds generally have underperformed the index rate of return in past several years on average because almost 80% of the mutual fund has underperformed the the index rate of return and has not been able to beat the index rate of return.

So it can be said that active Mutual Funds are not performing according to the expectations and they have not been able to outperform the market rate of return and passive form of mutual funds should be preferred which will be exploring the possibility of investment through index funds and exchange traded funds which will be passive fundso, if performance wise analysis is to be done then most of the mutual funds are actively managed has underperform the market rate of return and investment into these funds should only be made after analysing the past performance and being a sceptical through the components of the portfolio.