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Quant-Based Mutual Fund Schemes Are Coming. Should You Invest?

Quant-based mutual fund relates to the investment fund which elects securities by utilizing advanced quantitative analysis. These schemes have an evidence-based method for stock selection. Precisely meaning that quant fund depends on mathematical analysis. This might sound mind-boggling to some, and therefore, can be made clear using an example. Let’s suppose that an individual runs the XYZ Funds, and he decided to use the Quadrix system on his screen and selected the stocks. As the Quadrix system uses more than 80 variables in 7 specific categories, including Value, Quality, Estimated Wealth, Momentum, Volume, Financial Strength and Performance, this system will assign a different value to each of the variables accordingly, helping the individual running the XYZ Funds to pick the stock with the highest points.

Several mutual fund mentors have expressed their belief that the quant-based mutual funds are beneficial for the future of the fund industry. The most important fact about quant-based mutual fund is that it limits human interruption and relies on math wholly. Since in business there is no space for emotions, therefore, the system will guide and signal when to buy and sell in a practical manner.

However, it is noted that often the funds have their own choice of selecting the model through which the stocks are selected. These models include parameters, such as P/E, P/BV, earnings, growth, financial ratios and performance of the stocks compared to the industry. Therefore, quant-based funds comprise of wide data crunching. This method cuts off the manager’s authority in selecting the stock. Instead, the model itself picks the stock according to the criteria fed into the funds model.

To this date, with across 3,500 mutual schemes accessible in the market, the mission of choosing the accurate mutual fund can be rather baffling. Although many investors do feel that any kind of mutual fund will help them in acquiring their desired aims. However, that is an inaccurate belief because each mutual fund scheme is different from another and there is always a chance of risk. Moreover, selecting beneficial Mutual Funds involves a rigid technique, where both quantitative and qualitative parameters are studied, as it is essential to have a consistent performer in your portfolio; those who can be by your side in good and bad times. Hence, there are some facts which can be helpful in choosing the right mutual fund scheme, such as:

•    A fund supported with morality

•    Knowledge of the fund management crew

•    Investment ideas, methods, and models followed at the fund houses

•    Investment target

•    Fund execution

•    Expense ratio

•    Exit heap

•    Investor assistance and clarity

•    The tax consequences

In conclusion, paying adequate attention to the few pointers mentioned above can be considerably useful for an individual or a company in helping them in investing in the quant-based mutual fund schemes.