In today's era, the realm of finance and investments is filled with overt exuberance. Be it Asset Management Companies (i.e. Mutual Fund houses), PMS (Portfolio Management Service) managers or even broking firm are all boasting of managing large AUMs (Assets Under Management) - calling themselves big. The advertising agencies (along with the marketing team of theses AMCs, PMS houses and broking firm) are doing a great job of painting the city with all such tall claims. But the question remains - Can such tall claims really help you make great investment decisions?

Today the impact of these advertising campaigns is so high, that we have lost the idea of "simplicity" and "prudence" while investing. Everything appears so innovative and colourful. Even your friends, colleagues and family members are influenced by the idea of "big is beautiful", and in the bargain made terrible investment decisions.

Remember while big may echo boldness, but small would look beautiful!

While investing in mutual funds too, very often, many of you investors are of the belief that larger the AUMs managed by a mutual fund house, the better it is. You may think that it reveals the magnitude of the trust evinced by several investors.

Yes, sure it does depict the magnitude of the trust evinced by several investors, but it does not always signify that you are making a prudent investment decision.

Just relying on what your agent / distributor / relationship manager is saying that "larger the AUM of a fund, the better it is!" may not lead you to take wealthy investment decisions. But for him (agent / distributor / relationship manager), it would certainly be a wealthy advise as he'll get hefty commissions from these large fund houses.

Remember, during the euphoria of the equity markets all the unscrupulous intermediaries are just there to make hay when the sun shines (as they are bred by large fund houses with large AUMs). But for you to create wealth in the long-term what's required apart from confidence while investing (which you get by judging by the AUM size), is the performance your mutual fund scheme. And when we talk about performance it does not only mean returns generated by the fund, but also how well the fund manages the risk which it is exposed to, the portfolio and the investment systems and processes.

(NAV data is as on April 04, 2011. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%) *AUM as on December 31, 2010 (Source: ACE MF, PersonalFN Research)

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

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