KEEP A TAB While the best 10-yr
SIP return from a diversified fund is 29.45% CAGR, the worst is just 7.6%;
investors should review fund performance regularly, say experts
Should I start a systematic
investment plan, or SIP , in an equity mutual fund and forget about it?
This is one of the most commonly asked questions by investors who want to or have put a portion of their regular income in equity schemes to meet various goals like buying a house, planning for child's education and overseas holidays. While financial advisors emphasise the importance of long-term investing, usually for 7-10 years, the `fill it, shut it, forget it' strategy might not work always.Wealth planners advise that investors need to review the performance of their investments regularly to ensure their money is working hard enough for them.
This is one of the most commonly asked questions by investors who want to or have put a portion of their regular income in equity schemes to meet various goals like buying a house, planning for child's education and overseas holidays. While financial advisors emphasise the importance of long-term investing, usually for 7-10 years, the `fill it, shut it, forget it' strategy might not work always.Wealth planners advise that investors need to review the performance of their investments regularly to ensure their money is working hard enough for them.
A study of 94 diversi fied equity
schemes will tell you why keeping a tab on performance is important. Data
compiled by ETIG show of the 94 open-end diversified equity mutual fund
schemes, for a 10-year SIP period, the best performer gave an annual return of
29.45% while the worst performer gave 7.6% returns.At less than 8%, the equity
mutual fund has delivered lower returns than some long-term fixed deposits.
So, if `10,000 had been invested
every m o n t h fo r 1 0 ye a r s i n U T I Transportation and Logistics, the
best performing scheme, it would have grown to `43.16 lakh in a decade. Now, if
the same amount was invested in a laggard like JM Equity Fund, it would have
grown only to `17.26 lakh.
The study shows while it is impor
tant to focus on investing in the long-term, it is equally crucial to pick the
right product.
Out of 94 schemes analysed, 12
returned less than 10% on a compounded basis over 10 years. Though the number
of underperformers is not high, it is still a reminder that winners of the past
need not maintain their streak over a pe riod of time. This is relevant to sev
eral investors today who have been sold equity mutual fund SIPs by distributors
almost like a returns-as sured arrangement.
No comments:
Post a Comment