The fund's corpus is a good place to start. Look for one that is neither too small nor too big. The current regulations impart a higher cost structure to small-sized funds. Besides, it's difficult for managers of small funds to get information ahead of the market because big research houses and companies seldom entertain them. The larger funds, on the other hand, have their own disadvantages.
It is almost impossible for a very large fund to allocate a sizeable portion of its corpus to a small-cap stock without disturbing the price of the scrip. Therefore, big funds are forced to invest in large-cap stocks. This explains why most large funds tend to move like index funds because their portfolios begin to resemble the index as a whole. Hemant Rustagi, CEO, Wiseinvest Advisors , says, "If a fund becomes too large, stock picking becomes difficult. This is most evident in mid-cap-oriented funds, where stock picking is most crucial to performance."
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