03-12-2022, 12:55 PM
Mutual funds and impact of drawdowns on returns
<!-- SC_OFF --><div class="md"><p>In my country we unfortunately don't have access to global stocks and ETFs, the only way to gain exposure to foreign markets is through overpriced mutual funds. It's better than nothing though, but during this downturn I'm learning mutual funds carry a risk not necessarily derived from the underlying asset,<strong>drawdowns</strong>. </p> <p>When redemptions outpace and negate the organic price movement of the underlying assets, you could simply watch you capital shrink and this is not based entirely on the sentiment of the holders of the fund(profit taking, rotation, lost belief in the fund managers/strategy etc). How can one guard against this? What signs to look out for to identify more stable funds which are less prone to huge losses due to drawdowns?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/daab2g"> /u/daab2g </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tcc929/mutual_funds_and_impact_of_drawdowns_on_returns/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tcc929/mutual_funds_and_impact_of_drawdowns_on_returns/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>In my country we unfortunately don't have access to global stocks and ETFs, the only way to gain exposure to foreign markets is through overpriced mutual funds. It's better than nothing though, but during this downturn I'm learning mutual funds carry a risk not necessarily derived from the underlying asset,<strong>drawdowns</strong>. </p> <p>When redemptions outpace and negate the organic price movement of the underlying assets, you could simply watch you capital shrink and this is not based entirely on the sentiment of the holders of the fund(profit taking, rotation, lost belief in the fund managers/strategy etc). How can one guard against this? What signs to look out for to identify more stable funds which are less prone to huge losses due to drawdowns?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/daab2g"> /u/daab2g </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tcc929/mutual_funds_and_impact_of_drawdowns_on_returns/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tcc929/mutual_funds_and_impact_of_drawdowns_on_returns/">[comments]</a></span>Kind Regards R