…Investors push all the wrong emotional buttons
Mutual Funds quoted at the Nigerian stock market are currently experiencing moderations in their prices as a result of the apathy that has continued to characterise the market. 
Many of the funds that suffered during the bear market have either closed flat or recorded marginal declines in their prices even as investigations reveal that a lot of investors are not willing to stick around for the comeback.Â
And who could blame them? It’s hard to hang tough when your fund has sunk 50% or more. Yet, analysts say that fleeing short-term laggards or jumping to the hot fund often undermines investors’ returns.Â
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. There is always a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.
A cursory look at the funds and other unit trusts schemes that are quoted on the NSE showed that investors the bid price for most of the funds have been quite lower than the offer price. Specifically, as at the close of trading last week, only the Stanbic IBTC Guaranteed Investment Fund has a high bid price of N112.00 as against an offer price of N111.92.
Other major funds that closed flat during the week include Kakawa Guaranteed Income Fund which closed at N0.84, Lotus Capital at N0.81, UBA Bond Fund at N1.48 and Legacy Fund at N1.02 respectively. The Coral Income Fund also closed on both sides of the divide at N1,184.45.
On the other hand, investors were willing to take up the ARM Aggressive Growth Fund at N9.08 as against an offer price of N9.17. The bid price for the Coral Growth Fund was N1,514.09 compared with an offer price of N1,538.66.Â
Stanbic IBTC Nigerian Equity Fund remained the highest priced fund with an offer price of N7,078.91 while investors were willing put up a bid price of N6,886.14.
Analysts volunteered that investor returns adjust the officially reported returns based on cash flows into and out of funds. The gap between the figures essentially tells you how well or how poorly investors did at timing.Â
Regarding the performance of some of the funds, a fund manager volunteered that the gap between reported returns and investor returns had shrunk because customers were fleeing funds in droves as the financial crisis deepened.Â
“Initially, that was a good thing because stocks were falling like a rock. But when, at a moment of deep despair, stocks started to rally, a huge amount of money was sitting on the sidelines. It was gathered that market volatility has further pushed investors to the sidelines even as they tend to reduce their exposure to risk through diversification among different funds portfolios.
Analysts however advised that a commitment to sound diversification strategies remained the most important step to take.