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Stop Chasing Past Mutual Fund Returns…! Betting on the yesterday’s Mutual Fund Returns could prove disastrous Tomorrow.

by Holistic Leave a Comment | Filed Under: Mutual Funds

Holistic Investment - Mutual Funs

It is a widely-acknowledged practice to invest in a mutual fund that has yielded good returns in the past believing it will do well in the future as well. Even financial advisors are prone to stick to this past performance benchmark while recommending mutual funds.

Why everyone seems to be obsessed with the past mutual fund returns despite the disclaimer in the offer document of every fund saying clearly, ‘Past performance is no guarantee of future results?’

Studies abound showing that many mutual funds with good past returns have yielded poor results in the future. There is no close correlation between high performing mutual funds in one period with high performing funds in the subsequent periods.

Regardless of this fact, investors harp on past mutual fund returns while investing in the fund. Old habits die hard is what we can say. However, we must caution you against this practice.

The approach to judge a mutual fund on its past returns is fraught with danger. Here we list the reasons why chasing the past returns of mutual funds is a bad idea.

Mutual Fund Returns when Fund Managers move out or are changed…?

The performance of a mutual fund is also due to the manager managing it. If a mutual fund manager who is responsible for the brilliant returns of the fund resigns or is replaced, the performance of that fund is bound to be affected.

The new mutual fund manager may not be able to yield the same performance. If you’re not aware of the change in the fund management, betting on past mutual fund returns won’t be safe.

Risky Mutual Funds tend to yield stupendous returns in times of bubbles and booms

A mutual fund that entails high risk often clocks spectacular returns. In such cases, figures don’t betray the propensity of risk involved. This can be noted during booms and bubbles.

Recall the internet bubble of late 1990, many internet funds looked lucrative for investors and they rush to invest in those funds but when bust happened they suffered huge losses. In many instances more than 90% loss was recorded.

The same holds true with the real estate boom. When the going was great, none expected that it would crash but it did and made many investors in real estate company shares bankrupt.

In each case, mutual funds having a major stake in these high-risk assets looked like they had incredible returns until the bursting of the bubble happened. What gets proved that the criterion of judging a mutual fund is not reliable. Give a second thought before you pick a mutual fund solely for its past returns.

Huge Assets restricts the Mutual Fund Returns

If a mutual fund is performing well, investors scramble to pour money into it. This increases the volume of money the fund manager has to spin into a business. While it increases the management fees for the mutual fund company, it entails problems since with the increased cash it is harder to earn a good rate of returns.

For example, 1,000 crores mutual fund could yield better returns than 10,000 crores mutual fund could.

In the investment space, the size of the asset has a definite role to play. A mutual fund is restricted by law to invest only up to 5% of the networth of a single company. Hence the size of the fund’s capital if bigger makes it difficult to invest in focused or concentrated portfolios. A mutual fund with huge assets is forced to over-diversify.

A mutual fund with smaller assets can invest in focused portfolio and generate more returns.

If you can’t rely on past mutual fund returns, what are other ways to go for?

Now you’ve learned the perils of looking at past mutual fund returns alone while investing. You must be wondering how to evaluate a mutual fund worthy of investment. You will be close to the mark judging diversified equity fund on the following parameters :

  • Match your investment objective with that of the diversified equity fund
  • Evaluate returns across diversified equity funds within the same class
  • Check Diversified Equity Fund Returns against the benchmark index
  • Evaluate the consistency of the diversified equity fund
  • Check the costs associated with the diversified equity fund scheme
  • Risk-Returns analysis of diversified equity funds
  • In addition to the past mutual fund returns, looking at the above parameters will help you choose a right mutual fund.

Click here to find the best performing mutual fund now.

Calculate your Mutual funds returns:

If you want to know the expected returns from your mutual fund investment, here is an easy and simple to use “Mutual Fund Returns Calculator”.

Let’s see how it works.

First, choose the nature of your investment, whether SIP or Lumpsum investment.

a) If you choose SIP:Then type the amount of your investment, the frequency of your SIP, whether it be monthly, daily, or quarterly. Now select the annual interest rate. Then enter the duration of your investment. And towards the end, you will get the total amount invested and the future value of your investments.

b) If you choose Lumpsum: Then type the amount of your investment, then the annual interest rate, and the duration of your investments. And towards the end, you will get the total amount invested and the future value of your investments.

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below.

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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
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based on 61 reviews

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