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Advantages & Disadvantages of Long Short Mutual Funds

In majority of mutual funds, short selling is not allowed. Here short selling can be used as a leverage for more long positions in the market. By capitalising on short selling, one can get into fresh new long positions.

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Advantages & Disadvantages of Long Short Mutual Funds

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  1. Advantages & Disadvantages of Long Short Mutual Funds www.avendus.com/india

  2. Short selling is allowed In majority of mutual funds, short selling is not allowed. Here short selling can be used as a leverage for more long positions in the market. By capitalising on short selling, one can get into fresh new long positions. www.avendus.com/india

  3. Risk of stock selection Even though you are able to both buy and sell stock, the process of choosing the right stock is not up to you. This falls in the hands of the fund manager and you’re not privy to the information of what stocks are bought. This is the same in all long short funds in India. www.avendus.com/india

  4. Escessive returns Since these stocks bank on the market falling as well as rising, it creates greater risk and thereby greater opportunities for excess returns. Market volatility plays a key role in generating higher returns. www.avendus.com/india

  5. Diverese Portfolio For people who are planning to mix up their portfolio or looking for high risk-high reward credit solutions, these funds are a good idea to invest in. It is always better to have multiple funds and not park all the money in one fund. www.avendus.com/india

  6. Risk of uncertainty Long short funds fall in hedge funds category and are therefore not registered with SEBI. Since these funds are allowed to trade in the derivatives market, it is not strictly regulated and the risk remains high. www.avendus.com/india

  7. Thank You www.avendus.com/india

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