So far in this section we have gone through many matrices. these matrices provided an indicator of what is the current performance of a mutual fund and also provide a pointer to where the mutual fund could be headed for in the future in terms of performance. However, there is another way of gathering this future predictions through experts, experts normally have added the information based on which they can make judgment apart from looking at justice indicators or matrices. So, we will look at how to utilize expert opinion and decide on which mutual funds to invest in in the future. The important thing is, we should definitely study the matrices or indicators and make our own interpretations only then we should go and seek expert opinion. It is very wrong and often misleading to just seek expert opinion or opinion of the advisors and in According to that, in mutual fund investment or in any investment, the self judgment is a prime thing.

And there should be no alternative to self judgment in your decision making process. One can seek experts opinion for predictions on risks and returns from particular mutual funds. However, it is very important that at least three experts we consulted it is not a good idea to go with just one or two expert opinions and base your investment decisions on that. Experts can be found from AMC from banks from brokers or education institutions. So experts can be found in various places. However, it is very important to find the expert test the expert over a period of time and then start trusting His judgment while seeking expert eyes from a MCs or brokers etc.

Or banks. One needs to be aware that these agents Companies or agencies will have their own interest in particular mutual funds, well as there are commissions involved for them, which they will earn if they are able to sell certain mutual funds and more quantity. So one needs to be wary of this and take the opinion and judge it appropriately before they using it for making investments. When one collects experts opinions, we should try to get the finger off what is the predictors they are predicting, along with the probability with which they can a certain that the returns will be as they are predicting. Another very important aspect is that, while gathering information or predictions from the expert, we should gather both the optimistic view and the pessimistic view of the experts. Let's have a look at how we can use the experts opinion.

Once we have gathered this data through an example. Suppose we have gathered the opinion from three experts Regarding a particular mutual fund, the opinions are provided here, let's say experts see one predicts a return of 30% at a probability of 70% or an optimistic view, and a return of 5% of the probability of 30% as a pessimistic view, similarly, consultant our experts see two predicts 22% return at 60% probability, and 5% return at 40% probability. And experts see three predicts 18% return at 60% probability and 8% return at 40% probability. Let's see how we can use this data. To estimate risk and return. We can calculate the returns as follows.

For experts see one, the returns can be calculated as 70% multiplied by 20% plus 30% multiplied by 5%. This gives our estimated return of 15.5%. Similarly for experts, we get our Estimated return of 15.2%. And for experts see three we get an estimated return of 14%. Now to calculate the overall estimated return for this particular mutual fund based on the expert opinion, we can average these three returns that we have calculated, and we get a figure of 14.9%. So, we can estimate that from this particular mutual fund.

Based on the expert opinion, we can target for a return of 14.9%. Next, let's see how to compute the risk. We know that risk is an estimation of the standard deviation and standard deviation is nothing but the square root of variance. So, if you are able to calculate the variance, then we can get the estimation of risk variance can be calculated as the difference from the mean into the probabilities our sum of all these are is the variance. So, for the expert opinion see one We can calculate variance as 70% of 20% minus mean 15.5% plus 30% into 5% minus 15.5%, which is the mean all squared. Now, if we take the square root of this number, then we get 6.87% as the estimated risk, I have shown the estimated risk for the other two experts also you can calculate this triggers to verify for yourself.

Now, once we get the extra estimated risk Levine individual experts, we can do average of this figure to get the estimated risk for the mutual fund that we are trying to take invest in based on the expert opinion. Thank you for listening. See you in the next lecture.