Taking advantage of Mutual Fund expertise with Trend following for entry-exit

Trend Following with Mutual Funds

This is my research Note on applying trend following to Mutual fund NAV for systematic entry-exit from and to Midcap Mutual funds. The process creates an ALPHA of about 3% per BEAR market pa on the Mutual Fund returns.Its a simple systematic trend following where funds are moved from midcap fund to liquid fund of the same Fund House and vice versa. There is no forecast, bubble or valuation logic but simply Disciplined systematic trend following.


Please refer to pages 47-48 in the below ASHIKA INSIGHT magazine for my complete article on the subject.

Can you please explain the trend in detail.

What is the trend identification indicator you use

How to identify this trend before trend change?

Trend Following by definition doesn’t anticipate trend but follow it. I use simple dual MA crossover on the NAV chart of the funds. There will be whipsaws in a deep correction but the the real bear market will compensate much more in terms of comparison to buy and hold in the same fund. By definition, this strategy is ideal for high beta midcap and small cap funds like HDFC MIDCAP OPP, FT SMALLER COMAPNIES, MOST MIDCAP 30 etc.The actual MA , I use is not that important. What is more important is the conviction to follow and faith that whipsaw is part of the game and eventual bear market will come and keep us out of the equity and also will put us back in the equity. Please see my research note above for further details.

1 Like