It's not 100% true... just like a day trader or swing trader who go short when markets are falling MF investors.. atleast couple of them that I know shift their funds from one class to another to protect their fund value and also gain due to the shift. Then shift back to the original fund..
So this is a gain if you believe that a penny saved is a penny earned
Agree that Buy , Hold & Close your eyes guys dont gain anything from falling markets in MF
But by rule defined in prospectus which got approval from SEBI, MF can't go into 100% cash. So even in worst case, 80 to 90% of AUM is stuck in stocks. And when market goes down, all stocks go down with it irrespective of sector/company etc.
Yes, some sector under/out preform the fall.. but again, MF can't put more then x% of AUM in a sector.. That means, major part of their asset will still be open to market risk. So they are tied up again.
As you have mentioned, yes, then make those adjustments and try to control the loss..but they don't have much leeway there.
So, even if MF mgr know that mkt is going down, he can't do much but just sit and fall with it. By making such minor adjustment, they manage to beat the benchmark..and collect their full bonus..
As BUY Only investor, they can just manage company risk/ sector risk with some adjustments but they are always open to market risk and economy risk.
That's why I like my position as retail trader who is free from those constraints and be my own boss and enjoy 100% freedom.. (I can still make foolish mistakes of holding on to longs and not following my rules..but that is different issue altogather).
Historically crashes are always short but steep so if we can't benefit from the opportunity, then it is big loss. And due to sheer size, MF's can't shift there position in one day. That's is where our agility is big edge over those biggies.
I only pity their position. (maybe I am only one here on TJ who thinks like this).
Happy Trading