Investing in mutual funds can lead to significant returns if done wisely and aligning with the goals, risk profile and investment horizon, but it can also result in losses if not approached properly. Historical returns show that long-term investment (say of five 5 years) in mutual funds can offer up to 46% return. For example, small cap mutual funds have offered an average return of 30.78% in the last five years. Quant Small Cap Fund and Bank of India Small Cap Fund gave 45.68% and 35.59% returns. Mid cap funds provided around 26.33% average return, and large cap funds gave about 16.87% average return. These returns highlight the potential of consistent and long-term investing.
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After looking at the past performance of equity mutual funds, are you willing to make investments in these funds? Should investors go overweight on equities now? How to decide on the allocation?
“Currently equity markets are in a correction mode which means it is a good time for investors to invest and accumulate. The correction seems to be not very steep and valuations especially in mid & small caps still remain high. This is a good time to invest lumpsum in large cap tilted products where valuations are reasonable at the same time investors can do an SIP top up in mid & small caps and deploy lumpsum when valuations turn reasonable,” said Rushabh Desai, Founder of Rupee With Rushabh Investment Services.
However, some investors lose money because they do not research properly or chase quick returns. Switching schemes frequently due to short-term losses often results in the capital loss. Those looking to achieve long-term goals should consider mutual funds matching the investment horizon and risk level.
In the last five years, Nifty50 and BSE Sensex have gained 21.49% and 20.33% respectively. In the last one year, the benchmark indices, Nifty50 and BSE Sensex went up by 28.45% and 26% respectively. Nifty50 and BSE Sensex, in 2024 so far, have surged by 12.58% and 11.25% respectively.
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Based on the current market scenario, investors should prefer which mode of investment? Should they invest through SIP or lumpsum?
“Equity markets are expected to remain in a price/time correction for some time thus investing in a staggered manner and buy on dips would be ideal as no one knows the bottom. Asset allocation should be based strictly on one’s goals, risk appetite and time horizon. Going overboard in equities today is not something I would recommend today as I would still like to see the prices/valuations fall further,” he recommended.
When investing in equity schemes, it’s crucial to match the scheme with your risk tolerance and investment horizon.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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