It is a common practice that we invest in a best performing funds and the day we invest its under performance starts. It seems that bad luck was just waiting for us to invest. Fact is lot of other factors are also involved in selecting a good fund apart from the luck or past performance.
Let's see the other factors which plays important role in performance of your fund :
1) Fund House - First of all we need to assess the fund management team, to ensure that the money we are investing is in safe hands. Need to check that how stable is fund management team,Experience of Fund Management Team (Across Cycles),Does fund manager instill a high level of confidence in communication. How seriously fund house takes their fund management business..
2) Investment Philosophy - How clearly the fund philosophy is defined, e.g fund would be managed in growth style, value style, dynamic, thematic etc... Also understand advantages and disadvantages of particular philosophy.
3) Process - Most important aspect in life to achieve anything with minimum error is to adopt a process. Whenever you follow a process things move systematically and achieving goals become easy.
Similarly for investment we need to check that fund house is strictly following some process or not. Many a times in past it has happened that fund house leaves everything on a STAR fund manager instead of following a process.It does work in favour in a particular market condition but when situation changes the fund becomes the worst performer. So need to check on following points
Is there a well laid down , comprehensive process in place ?
How much flexibility does the fund manager has in decision making?
How are stocks researched?
How adequate and effective is the risk management process?
4) Portfolio - Whatever is described in above three points should reflect in the portfolio formed by a fund manager.
The stocks/Sectors selected and portfolio turnover is true to its mandate?
What is concentration risk in the portfolio?
Sufficient rationale for areas of concern?
5) Performance - The last but not the least important is Past performance. I believe that performance is the product of above 4 steps. If any fund house/fund has got them in place performance is going to follow. May be in short term other fund might take over but in long term it would emerge as a star.
Next time whenever you select a fund do proper homework or hire a Financial planner who can do it on your behalf.