In Search of a Winning Combination-Evidence from India
In Search of a Winning Combination-Evidence from India

Summary/Abstract: With the introduction of Mutual funds in India in 1963, the Indian investor has shown positiveresponse to mutual fund investments which is evidenced through increasing AUM (Assets UnderManagement) every quarter. So far as management style is concerned the industry offers two options to thecommon investor- on one hand the passively managed funds with the sole objective of replicating theirbenchmark index and on the other the actively managed funds where the fund manager continuously puts hisefforts to enhance the returns, by making frequent changes in the composition of the portfolio. The commoninvestor with limited savings cannot be expected to hold too many funds in his portfolio. Further with limitedexposure to financial concepts and complexities he is left guessing on the right combination of funds thatshould constitute his small portfolio. This paper is a sincere attempt to address the above mentioned situation.We have empirically tested and shown that given the restricted savings which combination, either only twopassively managed funds, two actively managed funds or a portfolio comprising of one of each type will winthe race for the investor. This paper will be of interest, particularly to the small investors, academicians aswell as the financial advisors.

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