Which mutual fund to choose in 2022: rating on profitability and reliability

Mutual funds as a form of collective investment and an alternative to individual investments are becoming interesting to an increasing number of potential investors. Many asset holders, before choosing a mutual fund, analyze its profitability. Nevertheless, although this indicator is one of the key ones, it should not be decisive. In addition to the potential profit, it is important to evaluate the reliability, management strategy and other performance indicators of the fund. It is recommended to start analyzing companies from those that have already been ranked by mutual funds in terms of profitability and reliability.

How to choose a mutual fund

If you intend to invest in a mutual fund, remember the risks that are present in any segment of investments, and take the choice of the fund seriously. For this:

1. Determine your preferred strategy. At the same time, keep in mind that mutual funds with a conservative strategy may turn out to be less profitable and, conversely, an aggressive strategy, although capable of bringing large profits, is associated with increased risks.
2. Carefully study the possible options, in particular, evaluate the reliability rating of various management companies that manage mutual fund assets (can be found on the company’s website). At the same stage, it is advisable to test investment applications for ease of use.
3. Set a limit on the funds that can be invested without significant damage to your budget, including taking into account their possible loss.

Top 10 mutual funds in terms of reliability and profitability

Важно понимать, что сам ПИФ не инвестирует. Вложением средств занимается управляющая фондом компания, поэтому доходность ПИФа во многом зависит от профессионализма ее команды. Проанализировав рейтинги ПИФов из открытого доступа, можно выделить ТОП-10, которые чаще всего рекомендуются аналитиками для инвестиций:

1. OPIF “Global Stock Market”. It is managed by BCS. The fund’s profitability over the past year exceeded 40%.
2. OPIF “Global Innovations” with a yield of about 30%. Managed by BCS.
3. OPIF “Ingosstrakh-Advanced Technologies” under the management of the Ingosstrakh-Investments Management Company with a yield of 27% and more than 96% over the past 3 years.
4. OPIF “Precious Metals Market”, the Management Company of JSC “BCS Wealth Management”, whose income is 24.32% for the year and 106.1% for 3 years (formerly URALSIB Gold).
5. OPIF Gazprombank-Gold is managed by Gazprombank – Asset Management JSC with a yield of 72.38% over 3 years and 19.48% over the past period.
6. OPIF Sber is a Global Stocks (America) Fund managed by the Management Company “Sber Asset Management” with a yield of more than 18% for the year and 85.86% in the last 3 years.
7. Ingosstrakh-Precious Metals OPIF, whose assets are managed by Ingosstrakh-Investments Management Company. The yield for the year is 15% and 25% in the last 3 years.
8. VTB — Future Technologies Fund with a yield of 9.28% under the management of VTB Capital Asset Management JSC.
9. OPIF “Alfa-Capital Technologies”, managed by the Management Company “Alfa-Group” with a yield of slightly more than 5% and more than 80% for 3 years.
10. OPIF “Global Bond Market”, managed by JSC “BCS Wealth Management” with a yield for the year of 0.9%.

Important!  There may be dozens of different mutual funds in the management of one management company, the profitability of which will differ. Far-sighted investors usually invest in several funds specializing in various investments at the same time and thus collect a safe portfolio that allows them to compensate for losses and receive a more or less stable income.

Is it right to invest only in profitable mutual funds

This tactic is not the most reliable, since the profitability of a particular fund depends primarily on the competence of the Management Company, which is directly involved in investing. In this regard, when choosing a mutual fund, it is worth asking about the place in the rating of the company that manages it.

Of no small importance is the specialization of the fund and its structure. For example, a mutual fund may specialize exclusively in real estate, financial instruments such as securities, shares and loans, or be combined. The latter’s portfolio includes a wide variety of assets.

Another important factor determining the profitability of a mutual fund is the influence of various factors on the increase in the value of assets: from quotations to the global crisis.

Ideal at this level of risk can be considered a diversified portfolio of different mutual funds, each of which uses its own investment strategy.

Coefficients of mutual fund indicators

When choosing a mutual fund to assess its effectiveness and reliability, they focus on 3 main indicators, these are:

1. The Beta indicator helps to determine the real profitability of the mutual fund, for which the level of profitability of the fund is compared with the dynamics of the benchmark, for example, the MICEX index. It is believed that funds with a high Beta score are preferable.
2. The Alpha coefficient, which is used to determine the effectiveness of fund management. This coefficient shows the difference between the real return of the fund and the return that it should show taking into account market dynamics. Simply put, this is the difference between the yield and the Beta indicator. If this difference has a negative value, it is worth abandoning the choice of a specific fund and finding one with a positive Alpha coefficient.
3. The Sharpe coefficient is essentially close to the previous one, but with one significant correction: the profitability is compared not with the benchmark, but with the dynamics of the profitability of the fund over a certain period of time. A high indicator indicates competent risk management and correct policy.

The level of reliability of mutual funds and the risks of shareholders

Mutual fund is rightfully considered one of the most reliable ways of investing. This is achieved by:

• strict legislative regulation of the activities of the Criminal Code and control by the financial regulator. The company simply will not be able to manage the fund’s assets if it does not receive a license from the regulator.
• separation of the property of the Criminal Code and the fund managed by it. A specialized depository, which is an independent organization, is responsible for the safety of the latter’s property.
• through professional asset management. Unlike individual investments, collective investments do not burden shareholders with the need to learn the art of investing, the Management Company does everything for them.  A private investor is only required to diversify his portfolio competently.

As for the risks, it is more complicated here. The fact is that mutual fund as an investment is almost unpredictable. And even evaluating its effectiveness based on key indicators does not guarantee a consistently high income.  For a reason, when choosing a fund, it is advisable to study its profitability over the past 3 years.

Firstly, the tax legislation allows for the possibility of income exemption from personal income tax if the investor owns shares for 3 years, and it is for such a period that the fund can receive a tangible profit.

Secondly, the growth in the value of the fund’s assets over the past year does not mean that there will be a rise in subsequent years. And here it is important to focus on the rating of the Management Company itself, as well as on how many funds and for how many years it manages them. If the company is relatively young, it is quite difficult to assess the quality of its work.

It is worth noting that the strategy and the composition of assets increases the risk of losses. For example, if an investor invests in highly liquid assets, and the management Company adheres to an aggressive strategy, the risk of going into negative increases.  At the same time, with a successful placement of assets, the profit of the mutual fund can exceed the wildest forecasts. The probability that all the assets of the fund will go into negative territory and the investor will lose even the initial capital is reduced to zero. But in any case, it is worth using only personal funds for investment, the possible loss of which will not lead to a financial crisis of the investor.

Published: 27 April, 2022