Over the short to medium term, their performance can fluctuate significantly even resulting in negative / low returns over various time periods.
After one and half years of investing in a large cap equity fund, my total returns is even less than the principal invested. I would have got at least 4% in savings bank account. Should I stop the SIP and withdraw the money immediately? – Divitt Arora
Equities, generally, are known to beat inflation and outperform asset classes such as debt, cash and gold over the long term (5 to 10-year horizons), although returns aren’t guaranteed. Over the short to medium term, their performance can fluctuate significantly even resulting in negative / low returns over various time periods. Further, time periods for recovery of such losses can vary. For instance, in 2008-09 the S&P BSE Sensex corrected by over 58% from its peak and this level was meaningfully breached only in Jan 2014. Of course, valuations at its peak were significantly above average historical levels and should have acted as a guide to investors to reduce allocations to equities. Considering these characteristics, allocation to equities should be based on one’s investment horizon and risk appetite. SIP is one way of riding the volatility, as more units are purchased at lower market levels vs higher levels, thereby reducing the average cost of investment and is an excellent vehicle for building long-term wealth. It is difficult to comment on your investment as the fund name hasn’t been mentioned. But generally, if you have a long-term investment horizon and moderate risk appetite, the SIP can be continued.
I invested in an ELSS fund last year. Now, I want to withdraw it after paying penalty. How can I do it? —Tanmay Mittal
ELSS investments carry lock-in period of three years and can’t be redeemed prior to completion of the lock-in period.
I am not convinced by the returns being generated by my mutual fund. Is there a way to check it independently? —A Shukla
Calculation of Net Asset Values (NAVs) for mutual fund schemes are governed by Sebi regulations. Mutual funds use NAVs to calculate fund/scheme returns. Further, accounts of MF companies are audited by independent auditors. As such one can consider the scheme returns published by fund companies as correct information. Of course, an investor’s return on investment in a scheme may differ from the fund’s return due to the timing of investment and holding period.
(The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to email@example.com)