The easiest way to choose a mutual fund is to sort a list by one-year return and pick from the top. It is also the closest thing the industry has to a reliable method for disappointing investors.

Recent performance is a poor predictor because it usually reflects a style being rewarded rather than a manager being right. Buying it means paying for the part of the cycle that has already happened.

What we look at instead

Our starting point is the portfolio itself. A fund’s holdings tell you what a manager actually believes; the fact sheet tells you what the marketing team believes. From there:

  • Philosophy. Is the stated approach specific enough to be tested, and is it visible in the holdings through different conditions?
  • Manager and team. Tenure on this scheme, experience across cycles, and whether the process survives an individual’s departure.
  • Portfolio quality. Balance sheet strength, cash generation, governance and the liquidity of the underlying holdings — particularly in mid- and small-cap funds.
  • Risk. Drawdown history, concentration, and for debt funds, credit and duration positioning. What the fund owns when it is under pressure matters more than what it owns when it is not.
  • Valuation. What the portfolio is priced at today, relative to its own history and to the alternatives available.
  • Consistency. Performance across cycles rather than in a single favourable window, and alignment between what was promised and what was delivered.
  • Capacity and cost. Whether the scheme has grown beyond the size at which its strategy works, and what the total expense takes from the outcome.
A fund does not need to be the best performer. It needs to do a specific job in the portfolio, reliably, at a reasonable cost.

The case for fewer funds

Most portfolios we review hold too many schemes. Fifteen funds across three platforms rarely produces better diversification than five chosen deliberately — it produces index-like returns with active fees, plus a portfolio nobody can summarise.

We prefer a compact set where each holding has a defined role: core compounding, a specific segment of the market, a source of stability, or genuine liquidity for near-term requirements. If a fund cannot be assigned a role, it is a candidate for removal, whatever it has returned.

When we sell

Underperformance alone is not a sell signal. A fund whose style is out of favour is behaving exactly as expected. What does prompt a review is a change in the reason we owned it: the manager leaves, the mandate drifts, assets grow beyond the strategy’s capacity, risk quietly increases to sustain returns, or the role the fund played is no longer required.

On our own position

Invyas Wealth is a distributor of mutual fund products, not a manufacturer, and is compensated through distribution commission disclosed by the respective asset management company. We would rather tell you that plainly, and then show you why a particular fund earns its place, than pretend the incentive does not exist.

Curation is the work. Access is not.