The next time you open your mutual fund’s factsheet (the statement that tells you where all your fund has invested in), notice the last item on the list. It will typically be “cash and cash equivalents”.
As per data provided to us by Morningstar India, a mutual fund tracking and research firm, fund houses have on an average held 92% (at the end of 2011) of their equity assets in their overall portfolios, up to 95.04% by the end of 2014 and 94% at the moment. The rest lies in cash. Why does your fund invest in cash? Is cash an investment at all?
Let’s put it in another way: if you have given your money to a fund manager, can she hold cash? The reality is: yes she can. So what’s the point?
