Equity offers high returns but there is something called reliability in mutual funds and that is what investors thrive for. Consistency in earnings must not be overlooked and must be an area of concern for long-term investors. Equities offer good returns in a bullish market but falter under tough conditions in a bear market, or a slowing phase. Mutual funds are reliable players that offer consistency to investors in the bear market and do extremely well in every condition.
It is important to have consistent return giving assets in your portfolio. A team may be dependent on one-star player but when he hits a rough patch, a consistent player will take the team forward. Mutual funds are those reliable players. A fund will not always give you finer results, irrespective of market movement. Small and mid-cap funds tend to rise more than the large cap in a bullish market. And so they must not give good results when the market falls. Mutual funds give that consistency to your portfolio making you win every time irrespective of the condition.
Mutual funds are rated according to their performance over a period of time which helps the investors review them and find out the appropriate fund that is suitable. Predicting the returns from a mutual fund is a waste since it all depends on market volatility and growth. The fund may outperform its competitors one year or may underperform the next year. So it is better to look at Compound Annual Growth Rate over a period of 1, 3 or 5 years.
A highly rated mutual fund would reap consistent returns and help fulfil investor's expectation over a long term. A good mutual fund requires being motive driven, thoroughly researched and experienced team leaders at the helm. Analyse consistent mutual fund returns over a considerable period of time and you will lead your portfolio to victory.
Mutual funds offer you a one-time investment plan or a Systematic Investment Plan (SIP) where a fixed amount can be invested monthly, quarterly or half yearly. Investments can be done at as low as 500rs and can be redeemed whenever required.
The debt funds give you 8-9 per cent returns and your investment will give a huge amount of capital appreciation. This is clearly better than a bank FD which gives lesser returns and will be taxed. Investors should consider the tax advantage enjoyed by debt funds over bank deposits.
BW Reporters
The author is a correspondent with BW Businessworld with keen interest in HR and employee welfare.
