For the last 2-3 years, mutual fund investments have been growing at a very robust pace. Systematic Investment Plans (SIPs) was a term that most set and class of investors began increasingly hearing off. Investment options were also very few, with gold going nowhere, interest rates low and real estate too in the doldrums.
Until a few weeks ago, most mutual funds gave pretty decent returns over a 2-5 year time span. In the last 3 weeks, things have gone horribly wrong and the 1, 2, 3 and 5 year returns are negative in most cases. Take a look at some of the large cap funds, in terms of assets under management and their returns. These are all growth funds:
|Name of the fund||1-year returns||3-year returns||5-year returns|
|ICICI Prudential Bluechip Fund||- 26.47%||- 3.37%||0.56%|
|SBI Blue Chip Fund||-24.41||-4.41%||0.37%|
|HDFC Top 100||-30.99%||-4.61%||-0.21%|
|Aditya Birla Sun Life Frontline Equity Fund||-27.43||-5.21||-0.31|
|Mirae Asset large Cap Fund||-25.38%||-1.32%||2.79%|
|Nippon India Large Cap Fund||-30.63%||-3.86%||-0.56%|
The real fact
The simple fact about mutual fund investments like most other investments is the "timing". If you buy a whole lot of units now, when the Sensex has crashed 35 per cent from peak levels, the chances are you would make robust money in the next 3 to 5 years. However, if you panic and sell now, you would end-up with nothing but losses.
One important thing that mutual fund investors should also learn is to encash, when they have made decent returns. If somebody, is telling you to hold it until eternity, the advise is without any sense of wisdom. You need to encash when you have made decent returns or else, you could end-up in the present situation, where mutual fund investments have turned negative even over a 5-year period, forget 1 and 3 years, which is at best disatrous.
For those who invested money a few years ago, it was the right time to look at encashing partially when the indices hit record levels. Now, is the right time to put more money to work after a disastrous few weeks on account of the coronavirus.
It's time now, even to increase your amounts through the Systematic Investment route plans, which should hold you in good stead in a few years from now. However, if you are sitting on a pile of cash, it would not be advisable to invest very large sums and one can invest in a staggered manner, given that there could be further downside risks to the market.
In all cases, it's pertinent to note that investments must be made with a time horizon of at least 3-5 years from now. This is because the economic damage caused by the coronavirus would take much time to heal.