The investment world is all about making wise investment decisions and optimising returns.
To achieve this, investors use various investing strategies and styles, depending on the market situations. There are two type of investors, one who believes that past performance is the right way to gauge the future performance and, therefore, funds with a demonstrated track record of higher returns will continue to do so. The other type of investor believes in the cyclical nature of the performance of funds and hence the funds with lower, or rather, lowest returns can turn into a multi-bagger for the investor. But these investments can be riskier at the same time.
The latter strategy is known as bottom fishing. Bottom fishing is the technique of investing in assets that have witnessed a sharp decline in their values due to intrinsic issues and external factors. The art of bottom fishing is all about speculating on the recovery in the prices of the depressed asset classes. So, this strategy is nothing but a way to invest in underperformers that are expected to witness an upturn in the coming period.
In the current market scenario where the equity markets have become choppy, many aggressive investors are looking for potential opportunities to buy into funds. Long term wealth creation requires lot of the patience and consistency. During periods of volatility, one can even invest into the underperforming funds to grab them at lower values. But will such investments yield better returns for the investors? Should you invest into funds that are underperforming the market? Is such bottom fishing helpful?
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