ARE YOU ‘REALLY’ WORRIED ABOUT THE PERFORMANCE OF YOUR MUTUAL FUND SCHEME?

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Several mutual fund investors are suddenly concerned about the performance of their mutual funds. If you probe a bit, you will find out that they are truly worried about the never-ending debate about the economy and markets that have been going on for a while now. This is not to say that their mutual fund schemes have given great returns – indeed, their returns have been lacking from their investments in various equity mutual fund schemes, but their worry is misplaced. Why, do you ask? If you look at the mutual fund schemes they are worried about or asking whether they should consider selling them, you’d find that those schemes are actually better performers in their respective categories. They have performed equally well in previous years. What’s more, these mutual fund schemes have been providing consistent returns over a long period.

So, why are these investors raising the alarm? For starters, their worries are elicited by all the talks about how bad the economy is doing and equally miserable forecasts for the economy. Add to that the new theme of detaching between the economic fundamentals and the markets, and you’d the entire picture framed for you.

The Indian economy has indeed been going through a bad phase for the past few years. Even before the pandemic struck the country, the economy was in the doldrums. The extended lockdown to tackle the epidemic has further added to the crisis. It’s still unclear how long it’ll take for the country to pick up the regular pace of economic activities. Due to large-scale layoffs and career threats, individuals are likely to store cash, and thus, the recovery would be quite slow.

Now, all these factors are bound to have a significant impact on your mutual fund investments. After all, in order to ensure that their stocks are doing well in the market, the companies would have to perform as well. However, this is not exactly how the share market works. Apart from the basics, there are other factors at work here as well. The additional liquidity in the system is adding to the rise of the stock prices. Even otherwise, the stock market oftentries to price the future happenings much earlier. So, the market could run ahead of the actual events.

Most mutual fund schemes have been performing poorly since 2018. This means before you start complaining about the performance of your fund, you should check the performance of its category and the benchmark. If your scheme has beaten the average of its category and benchmark, you are doing fine. Keep investing.

All you have to do in the present-day situation is ensuring that your finances are in order. This means that you should have a significant emergency fund, life insurance cover, and health cover in place for you and your loved ones.Whether you decide to invest in mutual funds or not, you should make sure that your investments are in line with your investment objective and risk profile. You might also consider investing in mutual funds that help you save tax such as ELSS funds, also known as tax-saving mf. Happy investing!