Mutual fund returns : Be careful!

When you visit a mutual fund website or a research website you see fund comparison table. This is all the more possible if you buy a personal finance magazine. Then you read them and get confused. One senior journalist told me “If I look at the returns that I have got on my funds are great, but all websites tell me, that this fund is a bad fund” what should I do?

A good question. Over a shorter period one fund may have done well and another fund may have done badly. However, as an investor if you switch from a “poorly performing fund” to a “better performing fund” and do it say 5 times in 7 years, you may not have benefited!

Also in my personal interaction with individual investors I have found them craving for variety. So all that a distributor has to tell them is “Sir, this fund has given 47% return in the previous year”, he will plump for it. All funds follow a good performance with bad performance – so the investor gets into a fund which is about to start performing badly! For many people I meet buying high and selling low seems to be a kind of a family bad habit – maybe an addiction!

Investors need to simply pick a large cap fund (like say Franklin India Blue chip fund or hdfc equity, dsp top 100 or hdfc growth fund, nifty bees, and stay there immaterial of all the noise that you hear in the market place.

And then stop reading about comparative performance, ratings, rankings, mutual fund awards and switch to watching HBO, Animal Planet and Discovery.

Financially and health wise you will do well.

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