Mutual funds- Here is what you should recognize in times like this !
We find in some of the newspapers comments by some worried investors regarding the poor performance of various Mutual Funds. Their arguments are no doubt simple and straight forward. When the markets have shown a rebound after the great fall in March 2020 due to Covid ’19, why the returns are far from satisfactory, in fact very meagre and hence they seem to be worried- rightly so.
For example, Canara Robeco Bluechip Equity Fund, the topper in the large cap category in the one-year horizon, is offering 3.76%. The scheme is offering around 9% returns in three- and five-year horizons. Similarly, PIGIM India Midcap Opportunities Fund, the topper in the mid cap category in the one-year horizon, is offering 6,68%. The scheme is offering paltry 0.05% and 3.50% returns in three- and five-year periods.
How do we explain this apparent aberration? While it is true that the markets have reclaimed the lost ground since March 2020 by over 1000 points, even Nifty, the fact remains that the Fund Houses have invested their money much before the Covid’ 19 Calamity when the indices were very much higher than what they are today. This means that unless the indices scale up substantially to the level of last year this time, the NAVs are bound to be lower. This of course is an aberration which would stand corrected in medium term and not in short term.
The Sensex was at 38,720 on July 8, 2019. It hit a low of 25, 981 on March 23, 2020 and it is currently hovering around 36,636. In short, the major index hasn’t made any actual gains in one year. The extreme volatility in the markets may make the investors jittery sometimes but Mutual Fund investments cannot be viewed on daily basis like other investments in shares or bonds but cumulatively over a mid- term period only.
So eventually the investor profile is what it matters. If you are averse to the risk which is common in shares, the same risk percolates to the MF schemes too.
If you are bothered about the extreme volatility or very poor returns offered by a scheme, you should look a little closer. Mutual fund advisors say mostly investors are unnerved about the performance of a scheme because the scheme is not in line with their investor profile. So in consultation with the Investment Advisor one can possibly switch over to other proven schemes.
But the fact remains that MF schemes do offer better returns over a period of time compared to other forms of investment tools available in the market. In a country like India which is at the threshold of economic growth and the per capita income of the people rising, more and more Corporates are getting registered, the Indices are bound to go up through discernible investors !
So let us be optimistic and keep investing in MF schemes under SIP which provide an opportunity to get more Units in times of crisis like this !
So start investing in MFs through Goodwill! A just a phone call away !
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