Why Mid-Cap Mutual Fund

Mid-Cap Mutual Fund Its Feature, Advantage and Disadvantage

Mid-cap mutual fund is a type of mutual fund which invests money in medium and small sized companies. There is no specific classification of the size of the company. But according to a general classification, a medium-sized company has a market capitalization of more than Rs 500 crores but less than Rs1000 crores, and a small-sized company has a market capitalization of up to Rs 500 crores. Mid-cap funds are high-risk funds. They generate high-returns if there is a positive movement in the index. Mid-cap are readily available for investment because they belong to less recognized companies. The growth opportunity is higher in mid-cap funds when compared to large-cap funds.

Regular investors and foreign investors have switched to mid-cap companies from large-cap companies because the market prices of large-cap funds are continuously increasing. Mid-cap companies are those companies which are under research by the investors. They are yet to be identified in the market. So the growth potential is always higher in funds provided by mid-cap companies. The investors also have the chance of earning double than their expectations at times. These companies are also termed as "Wealth Creators" by some investors. They also have the capability to become a large-cap company if these companies are regularly progressing. But mid-cap funds are volatile in nature so they have the tendency to fall just like a pack of cards when the market crashes. So it is important to be cautious when you decide to make investment in a mid-cap mutual fund. However, it is a good investment option if an investor wishes to have a diversified investment portfolio.

According to a mutual fund tracking entity, it is believed that mid and small cap mutual funds have generated an average return of 19.71% for three months, which is higher than large capability mutual funds that gave an average return of 14.86%. It is good to compare both the types of mutual funds because they are opposite to each other. Sometimes the mid cap and small capability companies follow the footsteps of large capability companies, but sometimes it is exactly the opposite. However, it is truly believed by many experts and investors that mid capability and small capability funds can boost the performance of the investment portfolio.

At times the mid and small cap funds tend to outperform large cap funds, but that does not mean that an investor should substitute all the large cap funds by mid and small cap funds in the portfolio. The upswing in the mid and small cap companies in the recent times is only because of lower valuation made in December 2011. However, the difference between the valuations of large and midcap companies has been reduced substantially. The large cap funds are valued lower than their average returns in the long run. Therefore these funds are more attractive for investment than mid cap funds when the funds are compared only on the basis of its value. But if your investment objective is high-growth than mid and small cap funds are a good option.

Mid cap fund may performance better than large cap funds in the future because they are undervalued funds. Investors should buy mid cap funds after making a Systematic Investment Plan (SIP) as it will help them to minimize the timely risk especially when they are planning for a long-term investment.

Features of Mid-cap Mutual Funds
Below mentioned are some of the basic features of a mid-cap fund.

They provide long-term growth potential

The market price of mid-cap funds fluctuates frequently in a short-term

These funds tend to reinvest the earning into the company in order to boost the company growth

They give very little dividend to their investors.

They are volatile in nature

They are less risky than large-cap mutual funds

These funds belong to companies that are less recognized in the stock market.

Advantageous of Mid-cap Mutual Funds
The benefits of investing into a mid-cap mutual fund are mentioned below.

They belong to companies that are under research by the market so they have high-growth potential.

These funds may provide high returns if the market price of the fund is continuously rising. It might generate returns which are double than your expectations at times.

They are considered to be a low-risk type of mutual fund when compared to large-cap mutual funds.

Mid-cap mutual funds have more chance to prosper than large-cap mutual funds

Mid-cap and small-cap funds are low profile and safer than large-cap mutual funds. They are a good option for investors who's investment objective is to have long-term benefits rather than short-term gains.

Risk of Investment
Mid-cap funds belong to those companies which are not well know in the stock market so chances of many investors buying the funds of that particular company are quite less. Secondly mid-cap companies are more prone to the risk of manipulation and fraud because these companies tend to neglect the risk control measures. Another risk involved in a mid-cap mutual fund investment is the risk of default. This is an uncontrollable risk which comes with every type of stock market investment. Risk of default is the risk of interested rate fluctuation and sudden changes made by the government in the economic and financial policies of the country.

Best Performing Mid-cap Mutual Funds in India
If you are thinking of making an investment in some mutual funds, then here is a list of some of the best performing mid-cap mutual fund companies in India.

Birla Sun Life MNC Fund (G)

HDFC MidCap Opportunities Fund (G)

SBI Magnum Emerging Busi (G)

Birla Sun Life Dividend Yield Plus

IDFC Premier Equity-A (G)

Tata Dividend Yield

HDFC Equity

HDFC Growth

Tata Equity PE

Quantum Long Term Equity

The investors should read the offer document provided by the fund carefully before finalizing the investment decision. According to the experts, the mid and small cap companies perform better and rise faster when the market is returning back. They return to the phase of growth when the economy comes back to the normal position. That is the reason why more investors seek to invest in mid cap or small cap companies. These funds are less risky and do not harm your portfolio as much as large cap funds do.

Mid-cap mutual funds are best investment option for those investors who are not risk-takers. These funds generate moderate returns over a period of time. They are considered best for long-term investment rather than short-term investment. This is because mid-cap funds take a long time to perform well as they belong to a less recognized family of mutual funds. 

Investing In Equity Mutual Funds

Mutual fund is a trust that pools money from a group of investors sharing common financial goals and invests the money thus collected into assets classes that match the stated investment objectives of the scheme. Equity mutual fund is a type of mutual fund. It is considered to be a more risky fund as compared to other fund types.

However, they also provide higher returns than other funds. It is a fund that mainly invests in stocks. These funds are categorized according to company size and the style of investment in the portfolio. They are specialty funds that mostly target business sectors like real estate, commodity sector, health care sector etc.

There are different types of equity mutual funds, each falling into different risk bracket. In the order of decreasing risk level, there are following types of equity funds.

Types	Investment Objectives	Portfolio Of Investment	RisK Associated
Aggressive Growth Fund	Capital Appreciation	These funds are invested in less researched shares. The shares are highly risky in nature.	Highly volatile
Growth Fund	Capital Appreciation	These shares are invested in companies that are expected to perform well in the future.	Comparatively less volatile
Specialty Fund	Capital Appreciation	They follow a particular criterion of investment. The portfolio includes only those companies that fulfill these criteria.	They are concentrated funds. Hence the risk is higher than diversified funds
Diversified Equity Fund	Capital Appreciation	A small portion of investment is made in the money market. However this type of fund mainly invests in equities. It does not concentrate on a particular sector.	This type of fund is well diversified so risk associated with sector-specific or company-specific investment is reduced.
Equity Index Fund	Capital Appreciation	The portfolio of this fund comprises of the same companies that forms the index. It is constituted in the same proportion as the index.	The risk associated is similar to the benchmark index. However a broader indice is less risky than a narrow indice.
Value Funds	Capital Appreciation	This fund is invested in those companies that have sound fundamentals. The share prices of these companies are currently undervalued.	It is a low risk fund if compared to growth fund or specialty fund.
Equity Income/ Dividend Yield Fund	The investment objective is to generate high recurring income and steady capital appreciation.	This fund is usually invested in companies which generate high dividend.	The risk associated with this fund is the lowest as compared to others.

Equity mutual funds are also classified according to their market capitalization. Market capitalization simply means the company's stake in the market. It is the value of the company on the stock market. Market capitalization can be divided into three categories i.e. large cap, Mid cap and Small cap equity funds.

Large Cap Funds
Large cap mutual funds are funds that are invested in large companies like Reliance, ONGC, Infosys, Tata etc. These companies are less likely to go bankrupt. So investing in large cap funds will not make you suffer huge losses. On the other hand companies like Reliance and Infosys are already well established in the stock market, so their chances growing further are less. These companies have reached a saturation point so do not expect huge profits from them as the scope is limited. Large Cap funds are also known as "Blue Chip funds" and "Mega Cap Funds".

Mid Cap Funds
Mid cap funds are funds that fall in the bracket which is between the large cap funds and small cap funds. These funds are invested in a medium scale company. The risk associated with these funds is comparatively lesser than large cap funds but higher than small cap funds.

Small Cap Funds
Small cap funds are invested in small companies. Small companies are more likely to go bankrupt. So the risk associated with this category of equity mutual fund is very high as compared to large cap and mid cap funds. Small cap funds are exactly opposite to large cap funds. Even though the risk is high, there are equal chances of the company to make huge profits. This is because small companies have a scope of growing into a big coming in the near future. So small cap funds can be rewarding too.

Sector Funds
These funds are invested in a particular sector. Sector funds are highly risky. Only sophisticated investors actively participate in investing into such funds. Sector funds are sensitive to various factors such as interest rate and currency rate. It is beneficial not to invest in a sector fund if you are not a regular investor. A utility sector fund invests only in utility sector. Other examples of sector funds are pharma, auto, petroleum, health and care, technology and FMCG.

Examples of some equity mutual fund in India

Birla Sun life Top (G)

Fidelity Equity Fund (G)

UTI Opportunities Fund (G)

HDFC Mid cap Opportunities Fund (G)

UTI Equity Fund (G)

IDFC Premier Equity A (G)

In India, the concept of mutual fund stands similar to equity mutual fund. In a country like India a common man usually ends up saving his earnings through a bank fixed deposit. F.D is a common form of investment for the people. It is a safe investment but money grows very slowly. If you are looking for a long-term investment which is more than 5 years and you also want faster money growth then equity mutual fund is a good option.

What Is Balanced Mutual Fund And Its Advantage & Disadvantage

Balanced Mutual Fund

A balanced fund is a type of a mutual fund that invests money in average performing stocks and bonds. The portfolio of the investor is a mixture of stocks and bonds of various securities. A balance fund is also known as "middle-of-the-road fund' because it produces moderate income and gives moderate capital growth. The funds are invested in common stocks, bonds and preferred stocks in order to seek high income and low risk of investment. These funds are sometimes termed as asset allocation funds because it gives the option of spreading your investment in various asset types by way of single investment. These funds are selected by investors who prefer to invest in safe and income generating securities.

It is a mutual fund where the portfolio consists of a stock component, a bond component and a money market component. It is a type of a hybrid fund which generally invests into moderate and conservative securities. In spite of being a part of the asset allocation family, the portfolio mix of balanced mutual funds dose not change with changes in the stock market. Most of the funds have a fixed proportion of stocks and bonds in the portfolio. However, some funds permit the fund managers to increase the proportion of bonds in the portfolio. Bonds are safer than stocks. They tend to protect the portfolio from being hit by drastic fluctuations in the stock market. Therefore, your balanced fund investment is saved from massive diminution of net asset value when the stock market crashes. Hence, balanced mutual funds are considered much more conservative than equity mutual funds. However, there are some funds that work on variable asset allocation policy. This means that the asset mix keeps on changing with changes in the stock market.

The performance of balanced mutual funds is unconventional. These funds under perform when the stock market is performing well, i.e., when the share prices go high. However, they perform quite well when stocks are not doing good. Investors keep a check on their investment and try to add more of bonds to the portfolio. This is because bonds are less risky and less volatile than stocks. Investors want to play safe so they optimize the portfolio by increasing the percentage of bonds and decreasing the percentage of stocks. It is true that some balanced mutual funds are restrictive in nature. This means that it only allows you to invest funds in the Ind Stock market. On the other hand, there are other funds which permit you to have investments in both traditional and international markets. Some portfolios also include investment holding in precious metals and other unconventional commodities.

Here is a list of some of the best performing balanced mutual funds in India.

HDFC Prudence

DSPBR Balanced

HDFC Balanced

Tata Balanced

Birla Sun Life

Reliance Regular Savings Balanced

FT India Balanced

Canara Robeco Balanced

Principal Conservative Growth

HDFC Children's Gift-Inv

Rolling-Returns-BSL-Balanced-Fund

Types of Balanced Mutual Funds

A balanced mutual fund comes with many advantages of investment. This type of investment caters to most of the requirement of an amateur investor. Following are some of the benefits of holding funds in a balanced mutual fund.

Simplicity
A single balance fund investment provides investors with the option of investing in varied securities. It is a portfolio consisting of stock component, bond component and sometimes money market component. This type of mutual fund is simple and easy to manage.

Diversification of Investment
An investment in balanced funds allows the investor to diversify his investment into stocks, bonds and money market instruments. It does not compel the investor to hold funds in a single type of market.

Low risk
A balanced fund investment comes with an advantage of low risk. The securities comprising the portfolio is a blend of stocks and bonds which brings down the risk factor attached with this type of investment. The portfolio is less volatile in nature.

Steady Income

It is a steady income generating type of a mutual fund. It might not give you huge income, but yes, it will surely generate moderate income over a period of time. Balanced funds mostly focus on the value and growth factors of the securities rather than making huge profit overnight.

Minimum Capital Requirement

A balance fund investment provides the investor with a flexibility of holding funds in the market with minimum or small investment. You don't need to invest large amount of money to have a balanced fund portfolio.

Disadvantages of Balanced Funds

It is true that balanced funds come with many advantages of investment. However, there are various arguments that are against this type of investment. Following are some of the disadvantages of investing funds in a balanced mutual fund.

Cost of Investment
Investors have to keep themselves updated with the stock market every time. This is because fund managers charge the same fees for a 60:40 and 40:60 ratio of stocks and bonds. If you forget to change the ratio of investment with market changes, then you may loose out on a lot of income.

Long-term Investment
A balanced fund investment is good for investors who are seeking long-term benefits. It is not a good option for people who wish to make huge income in a short duration.

Low Income
This type of mutual fund investment produces low income. So it is not a feasible option for investors who want to make more money in less time.

Mutual fund investments are subject to market risks. Similarly balanced mutual funds also suffer because of fluctuations in the stock market. However, patience brings you fruitful results. One should select a balanced fund as a part of the investment portfolio only if one has patience to wait long for fruitful results as this type of investment produces low income in small time. 

What Is Fund of Funds (FOF) and It’s Advantage & Disadvantage

A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment.

It is a type of mutual fund that invests other mutual fund schemes rather than investing in securities, stocks and bonds. Fund of Funds invests money in mutual funds offered by other asset management companies. It is a type of investment strategy wherein money is invested in other investment companies rather than investing directly in securities and bonds. It is also called as "multi-manager investment". Funds can be invested in the home asset management company or other external companies. The investor has a portfolio comprising of units of other mutual fund schemes. It is just like a conventional mutual fund which maintains a portfolio consisting a blend of equity, debt and money market instruments or non-financial assets.

Fund of funds provide investors with an added advantage of diversifying investment into different mutual fund schemes even with a small of investment. This further helps in diversification of risks in investment. However, fund of funds comes with a high expense rate as the cost of investment with different mutual funds scheme is high when added up together.

Features of Fund of Funds

Below listed are some of the significant features of the Fund of Funds

• It is a type of a collective investment scheme which provides investors with varied options to invest their funds.
• These funds offer diversification of investment.
• It reduces volatility of funds and produces average return on investment.
• The fund manager thrives to invest money in the best performing funds of the mutual fund market.
• It becomes easy to keep a track on the funds as there is only one fund that further invests into other mutual funds.
• An investment in Fund of funds requires adequate knowledge of stock market and expertise. So consulting a fund manager becomes mandatory. It also adds up to the total cost of investment. 

Advantages of Fund of Funds

An investment in Fund of fund can be advantageous to the investor and the fund managers in the followings ways.

Advantages to the investors

Some of the advantages that an investor is likely to have after investing their funds in Fund of Funds are as follows:

1. The investor has access to make investment in funds that are not easily available for retail investment.
2. Fund of Funds offers the biggest advantage of investing funds in only fund, but yet make investment in various different funds available in the market i.e., your investment is diversified.
3. The risk of investment is lowered because of diverse investment in funds. So the performance of the non-performing stock will not hamper the money-making ability of your portfolio.
4. These funds do not compel an investor to make huge amount of investment. An investor can happily invest even with a small amount of money.
5. The investment is made in various types of hedge funds which increases the potential of higher returns.
6. A skilled manager thrives to capture the best performing funds in the market which eventually strengthens your portfolio and increases the chances of high return on investment.

Disadvantages of Fund of Funds

We all know that investments in mutual funds and stocks are subject to market risks. All the mutual fund investments will have some pros and cons by default. Here is a list of some of the disadvantages of investing in Fund of Funds.

1. Fund of funds investments come with higher administrative and consultant fees be it a broker, a banker or a consultant. These fund managers earn huge amount of income in the form of consultancy fees. The fees are so high that there is a joke about this type of mutual fund in the industry. Hence, this fund is also known as "fees of fees funds" in a jovial way.
2. This type of mutual fund comes with limited redemption facility. It simply means that the investor is unlikely to redeem his/her investment into liquid cash whenever he/she wishes. This fund has "gates" and "lock-ups" on the fund invested. These are a financial term which in simple terms means limitations levied on the investor which restricts him/her to withdraw cash from the market.
3. Fund of funds has a very complex form of tax structure. The investor has to pay taxes on the capital gain even if they recover it in the form of cash. This again adds one more layer to the total cost of investment in the fund.
4. Transparency of information is important in this type of investment. So wisely appoint a fund manager for your investment. It is your responsibility to keep yourself updated about the stock market and the fund manager. Make sure that your fund manager does not take undue advantage of your investment.

An investment in Fund of Funds is a good way of entering into the world of mutual fund investment if you are an amateur investor. These funds do not require much of investment and expert knowledge. Over the past 10 years, it is seen that more people are seeking interest in investing in Fund of funds. The increasing investment has lead to faster growth of asset managed under these funds. The rapid economical changes has attracted a lot of traffic for this type of mutual fund investment as it provides security. 

Let’s Understand What is Exchange Traded Funds (ETF's)

An Exchange Traded Fund is a type of investment fund that is traded on stock exchanges. It makes investments in assets such as bonds, commodities, stocks and trades on its net asset value on the trading day. Most of these funds follow indexes such as stock exchange index and bond index. They provide investors with combined benefits of a close-end mutual fund and an open-end mutual fund. They are traded on a single stock at index linked prices. ETF offers diversification of investment along with flexibility of holding a single share at the same time. These funds are recently introduced in the management but they are very popular abroad.

ETF's offer the investor to choose from a pool of securities and assets in order to make the investment. Therefore these funds are very much similar to mutual funds except that these funds can be traded on a daily basis just like any other stock on the stock exchange through a share broker. The asset value of the fund is based on the performance of the index and the demand for that particular share. The fund providing company invests the pooled out money from various investors in the best performing stock on the stock exchange list. The contribution of the investors is nothing but a 'share' of the fund. The initial market price of the share is less however; it rises up as the performance of the shares improves. Contrary, if the share fails to perform on the stock market the market price of the share will fall.

Advantages of Exchange Traded Funds

The following are some of the advantages of investing in ETF's.

Less Expensive: ETF's are generally low cost funds because they are not traded and managed on a regular basis. It is also free from secondary costs of marketing and distribution.

Flexibility: ETF's can be transacted at any part of the trading day. This flexibility is not available in other types of mutual funds. Other types of mutual funds can be traded only at the end of the trading day. This advantage enables the use of hedging techniques and specifies the price at which the investors wish to sell the shares.

Transparency: ETF's have transparent portfolios which are priced at regular intervals throughout the trading day.

Tax Efficiency: ETF's comes with tax efficiency. These funds generate low capital gains because they have a low turnover from their portfolio. The tax efficiency is even more advantageous as securities need not be sold to meet the investor's obligations.

Diversification: ETF's comes with an advantage of diverse investment. It provides investors with an economical way of balancing their portfolios. It offers exposure to diverse markets which includes country-specific markets, broad-based international markets, industry-specific markets, commodity market, bond market and other broad-based markets.

Risk associated with Exchange Traded Funds

investing in any type of a mutual fund is not completely risk-free. There are some risks which can hamper the profit-making objective. An investor might encounter the following types of risks:

Economic Fluctuations: Since ETF's are traded on various stock exchanges, they are affected by the economical changes in the world. This is because shares are directly affected by the ups and downs of the economy. It is advisable to withdraw your investments from the market when you know that the market is falling.

Sector-specific Loss: The famous saying "Don't put all your eggs in a single basket" is rightly applied here. ETF's whose portfolio consists of investments in some specific sectors only face the risk of loss. Even if one sector goes down, it would bring down the market value of your share of the fund.

Low Returns: ETF's can sometimes give you low return on investment. This is because the performance of your fund fluctuates with the stock market. You cannot control the stock market as it is not in your hands.

However, investment in Exchange Traded Funds can bring you fruitful returns if the shares in this fund are regularly traded. It is important to keep a watch on the stock market on a daily basis. You must keep yourself updated with the price fluctuations. Use hedging strategies to multiply your investment whenever possible.

10 Questions to Ask Before You Buy a Stock

10 Questions to Ask Before You Buy a Stock

Before you buy individual stocks, you should be able to answer these questions.

It may seem like a given that you should do your homework before plunking down your hard-earned cash on a company's stock -- but many people don't.

"There are some investors who simply don't carefully weigh their stock-investment decisions,"

As stock market crashes have taught us, a carefree investing style doesn't work forever. In fact, its success usually comes to an abrupt end. It would behoove investors to relearn that painful lesson before the next crash. 

With that in mind, here are 10 questions investors should ask -- and answer -- before buying a stock. 

Of course, knowing all the answers doesn't guarantee a winning stock. Nothing can do that. But over the long haul, taking the time to consider these questions will make one a better, more well-informed investor.

1. What Does the Company Do?

Warren Buffett famously says he doesn't invest in what he doesn't understand. If the greatest investor of the past 60 years is brave enough to acknowledge that he doesn't understand all companies, we should all probably take heed. This first basic question is a simple one, but that doesn't mean it's easy. To answer the question, there are plenty of places to look, including the company's Web site.

2. Is the Company Profitable? 

This is also a simple question, which can be made more complicated by all sorts of variations on a company's earnings. Investors can read the quarterly and annual earnings reports to check out how much net income the company reported, in dollars and in per-share earnings. Later down in this column we'll address ways to mine for red flags in earnings.

3. What Is the Company's Earnings History and Outlook?

A quick scan of older news stories and the company's past quarterly statements help answer this question. Does the company have a history of steady earnings growth? Are earnings volatile? Remember, all trees don't grow to heaven: If the company is a maturing tech company, can it sustain the heady growth of its days as a spry, young growth company?

4. How Richly Is the Company's Stock Valued?

It's wonderful to find a company whose earnings are growing exponentially, but the other side of the equation is the value the market pays for that growth and the prospect of future growth. There are several basic methods of determining a company's valuation, including price to earnings and price to sales. These numbers can be easily found online. Price-to-earnings, or P/E, multiples aren't the perfect gauge, but investors do need to consider how much they are paying for a stock.

5. Who Are the Company's Competitors?

Companies don't operate in a vacuum. For every Coke  (KO), there's a Pepsi  (PEP) -- and a host of other competitors as well. Companies are constantly trying to take business from one another. Investors should know where their companies stack up: Does this company have the biggest market share in its industry? Is it a small but growing niche player in a competitive industry? Is it an industry dominated by one company, or is it a fragmented industry where even the biggest player controls less than 10% of the market -- such as in the supermarket business? Also, investors should increasingly pay attention to foreign competition, where lower-cost competition can put pressure on profit margins.

6. Who Runs the Company?

Unlike professional money managers, individual investors don't have the ability to drop by a company's headquarters and chat up the management before making an investment decision. However, that doesn't mean there aren't plenty of ways to find out about the leadership. Any company worth its salt will have a Web site that lists the senior managers, how long they have been with the company, their background and the company's history. If the company's executive suite has a rotating door, that may not reflect positively on the company's stability. Beyond the company line on the executive suite, investors should research articles about the executives. Often, trade publications from any given industry are useful in digging into a company. 

7. How Clean Is the Company's Balance Sheet?

Serious-minded long-term investors need to be able to read over a company's balance sheet. Is the company saddled with a huge amount of debt compared with how much it earns? Checking out a company's earnings alone doesn't tell you if the company has borrowed to the moon to achieve those earnings. It's also useful to see how much the company is spending on research and development and how large its inventory levels are. (If they are growing from last year, that may mean business is slowing down.) This brings us to question No. 8. 

8. Have You Read the Company's 10-K and 10-Q Annual Reports?

The 10-K report is the annual report every company is required to file to the Securities and Exchange Commission. It's much more in-depth than the more sanguine annual reports that companies file during earnings season. The 10-Q is the quarterly report -- similar to the 10-K report except that it is required on a quarterly basis. 

9. Are There Any Red Flags That Call Into Question the Company's Integrity?

This is where the 10-Q and 10-K filings come in handy. First off, every company needs to detail the risk factors that may undermine its prospects. Second, the explanations of the company's accounting practices and operating assumptions on matters ranging from depreciation rates on its assets to assumed rate of growth for its pensions tell you a great deal about whether the company is getting too aggressive.

10. Is the Company's Competitive Position Sustainable?

Run-and-gun investors looking for short-term gains might not need to answer this question, but serious-minded long-term investors do.