Richard Cayne Meyer Asset Management Ltd - Why invest in Mutual Funds

There are a lot of reasons why we use mutual funds in our clients’ managed accounts says Richard Cayne of Meyer Asset Management Ltd.  Broader diversification is important.  For most investors, it is simply not possible to get adequate diversification in a portfolio of individual stocks in order to provide adequate capital preservation.  Negative events adversely affecting one company can have a substantially negative effect on its’ stock valuation.   Most mutual funds hold over 50 different stocks or positions so negative events affecting one company have little, if any, effect on the total fund.

There are more reasons; some of them of even greater importance.  Because mutual funds are required to report their financial results in a standardized manner, we can analyze the actual performance of a manager over long periods of time.  We are required as advisors to remind clients that past performance is no guarantee of future results, but in the end, the best and most important filter we have by which to select funds, is that fund’s historical performance.  If a fund has produced top quartile performance for 10 or 20 years or longer, it is reasonable to assume that there is a reason for that consistency.  Short term results (1, 3, 5 years) are random.  The reality of fund performance is that in the universe of mutual funds in any asset category, there are perpetual top performers, perpetual bottom performers, and a lot of mediocrity.  Richard Cayne who working at Meyer Asset Management Ltd and in Tokyo Japan helping Japanese with portfolio construction and modeling says that its important to look at the funds track record not as an absolute guide of what’s to come but as an indication of the funds performance relative to others in same sector.

Richard Cayne living in Bangkok Thailand says that in addition, mutual funds make money in more than one way.  We expect share value growth over time; an increase in the value of our holdings.  Mutual funds also pay dividends and capital gains.  Funds are required by the regulators to pay to shareholders a very high proportion of the gains realized in any given tax year.  This is important, because with mutual funds, even if there was no share value increase in a given year, there will inevitably be dividends and capital gains that must be paid out to shareholders.  Unless you are taking current income from your fund and spending it (during retirement, for example) you will be reinvesting these dividend and capital gain distributions back into your fund.  The game we are playing with mutual funds is to accumulate more shares.  The more shares you own, the greater your account value, but more important, the greater the earning power of your fund because the next time a dividend or capital gain is paid, you own more dividend and capital gain paying shares.  This dynamic of mutual funds paying dividends and capital gains, which in turn increases the number of shares owned and the earning power of the fund, creates the horsepower to multiply earnings and is an often forgotten reason why mutual funds can be such effective investment vehicles for growing capital says investment advisor Richard Cayne at Meyer.

 Meyer Asset Management Ltd’s Asian based servicing office Meyer International Ltd is based in Bangkok Thailand and form part of the Meyer Group of companies which is wholly owned by Asia Wealth Group Holdings Ltd which is a London UK listed Financial Holding company.  Richard Cayne Managing Director of the Meyer Group has lived in Asia for over 17 years with the majority of his time living in Tokyo Japan consulting high net worth Japanese individual and corporate clients on offshore financial planning, investment and structuring matters.

Article source :- http://richardcaynes.wordpress.com/2012/09/07/richard-cayne-meyer-asset-management-ltd-why-invest-in-mutual-funds/