A very common question always asked by the investors is like, “In
the one year, returns on Mutual Fund Equity Investment is 10% whereas Market
has grown by 20%, So why that my
investment is not performing?”
Such question may arise in mind of investors which is a good
sign of their activeness and alertness towards their investments.
There are 3 aspects on which the question can be answered.
1) Fund Performance
If a particular Equity fund performance is to be evaluated then comparison
of its performance with the performance of Sensex or Nifty index should not be
the only criterion. In a particular fund scheme, there are generally several
stocks which are not part of Sensex or Nifty stocks. Thus, performance of fund
should always be compared with the respective Bench Mark index. After this
comparison one may observe that though Sensex / Nitfy may have performed well,
the bench mark index has not done that good. So, Bench Mark Index is first
aspect.
2) Period of Investment
The investment in mutual funds for the period of 1 to 2 years is
considered as short-term investment period which is not sufficient to judge the
performance of the scheme. The returns in the very first year may be very low
or even can be high returns and both the cases can’t be taken as criteria to
judge the performance of the scheme. Also, one cannot ascertain that which
category is going to outperform or low perform in the future. This is the
reason why the portfolio should be diversified into Debt, Hybrid & Equity
investment schemes. Equity fund gives growth in long term whereas Hybrid &
debt funds provide stability. So Period of Investment is the second
aspect.
3) Purpose of Investment
This is supposed to be the most important but unfortunately the
most neglected criterion. We, as Financial Advisor always request our clients to
define purpose of the investment. For example, if someone is investing for retirement
approaching after 20 years, then we insist not to track the scheme performance for
at least 12-15 years and keep accumulating to the investment amount. Returns on
the long-term investments in Mutual funds have paid the good returns. So third
aspect is Purpose of Investment.
Conclusion:
Actually, Investing in Equity or Mutual Funds is like playing a
Test Match. The more you stay on the crease; chances are more to make high
scores. The Run Rate (Rate of Return) is not that important. If we continuously
focus high Run Rate (returns), there are high chances of getting out at early
stage. We just need to ensure we are playing with a good batsman irrespective
of whether he is Virat, Sachin, Dhoni or Shikhar, Rahul or Rohit. We know all
shall score high if any of them remain on crease for a longer time. As we don’t
know who is going to score more in the long run, we cannot assure high returns
on any single scheme. Also, to be in the leading position, we need to do few
adjustments in the batting strategy (Portfolio Balancing) leveraging on the
situation offered from the opponents (Market).
Here, in this inning of your investments with you as a batsman,
your Financial Advisor plays the role of Buddy on the pitch, who
holds your hands in all situations and manages your emotions and hence your
performance!!
Hence investment in Mutual Funds or Equity is playing like a
Test Match where rate of return is just a check, whereas consistency and
staying on the crease for long time is the key to WIN. Hold hand of right
buddy to achieve Best Performance!!
-
Mr. Neeraj Adbe,
Head, Nagpur Branch,
S.W.S.F.S.P.L.
