Investors should keep investment horizon in mind as it determines the returns and reduces risks. If they have long investment horizon even if the market performs poorly in short term, it may overcome the losses in longer term.
At a time when banks in India are giving just 2.75% to 5.50% returns on the fixed deposits, for any investor, mutual funds, especially equity mutual funds become one of the most lucrative investment option. Despite Covid-19 pandemic hitting the country, returns on the mutual funds have been quite terrific as the top mutual funds have given more than 12% returns in the last three years.
When it comes to investing the fundamental goal for any investor is to earn more money in the form of great returns. For all such investors, equity mutual funds are the best financial tools and there is a reason why most of the investments from individuals come to the higher return mutual fund schemes from the organizations like Axis Bank, HDFC, ICICI, etc. amongst others. Here are the returns of the last three years of the top five higher performing equity mutual funds:
There could be various reasons behind such popularity; however, the major reason is that whereas returns on other investment options have declined significantly, equity market has outperformed others. Every investor aims to get better Return on Investment or RoI and for that he searches the financial instrument that have a great track record. Saving is easy but multiplying the investments is what makes a great investor.
As an investor, you should think to beat the inflation and for that there is no better financial instrument than equity mutual funds that have outperformed debt funds and fixed deposits.
Investors should consider a few points before choosing a mutual fund. For instance, they should know the risk involved in equity mutual funds as these are highly volatile and require long term investments. Therefore, investors should keep investment horizon in mind as it determines the returns and reduces risks. If they have long investment horizon even if the market performs poorly in short term, it may overcome the losses in longer term.
Similarly, investors should know about the past performances of the equity mutual fund as it tells the history of the management and the selection of equities. A well regulated mutual fund and the fund managers with proven track records are the obvious best choice. At the same time Expense Ratio is another factor that should be kept in mind as a hefty amount goes to Asset Management Company. It could be a tricky situation for an investor as higher Expense Ratio often comes with great fund managers.
The bottomline is that equity mutual funds are not just easy to pick in comparison to stocks but also reduce the burden of research and analysis of the stocks. These funds perform better than debt funds, fixed deposits and definitely be termed as the best financial instrument to increase investor’s wealth.
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