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Equity Mutual Funds May Test Investor Patience


Equity Mutual Funds may try investor patience, if the returns from them continue to be ordinary. Mutual funds are always advertised under the prospects of generating long-term returns. However, the problem right now is that even the long-term returns of 5 years has been dismal.


Equity Mutual Funds May Test Investor Patience

Take a look at some of the big equity mutual funds and their 5 year returns.

HDFC Equity Fund7.57%11.01%8.96%
Aditya Birla Sun Life Frontline Equity Fund-1.56%7.50%9.14%
ICICI Prudential Bluechip Fund1.75%9.71%9.83%
SBI Bluechip Fund-0.04%7.20%10.20%
Axis Bluechip Fund-0.53%12.76%10.74%

Returns the same as FDs

Returns in most of these large cap mutual funds have been the same as fixed deposits, which generate returns with a compounding quarterly yield. Given that the returns have been just about ordinary, it may start testing the patience of mutual fund investors. The markets right now are being fuelled by large inflows through Systematic Investment Plans. If these start to fall, we might see a sharper drop in the markets.

It has been extremely difficult for mutual funds over the last one year, particularly the small and midcap mutual funds. In fact, it would be a better idea to stay invested in some small and midcap mutual funds, given how stocks from the space have come falling down.

Getting solid returns will be hard

Investors, who believe mutual funds will be able to deliver a spectacular set of results in the coming year, could be in for a surprise, because of the economic slowdown. In all probability it will be hard long drawn process to churn out extra ordinary returns.

In fact, investing lumpsum at this stage in the stock markets would not be too prudent. It would be more advisable to continue with SIPs, given the volatility we have seen in the last few days. Redeeming them now, when the markets are at such low levels, does not make sense too.

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