5 Reasons you should never Invest in Mutual Funds
Updated: Mar 13
1. You are a stock Market Pro
If you are one of those from the leagues of Mr. Rakesh Jhunjhunwala who can easily spot multi-bagger stocks. In fact, if you are a stock wizard we recommend you become a PMS manager yourself and manage money for others as well. We all can use a smart Fund Manager. Rest all should invest in Mutual Funds.
2. If you love checking your Portfolio every day
Equity-based Mutual Funds can be volatile in the short Term. It is advised to sit tight after investing. Remember, investing in Mutual Funds is like selecting the best fund manager for your money. Once you have selected the Right scheme and the right Fund Manager to manage your money it is advisable to allow Fund Manager a couple of years of time to manage the money before you make any changes.
3. Wealth is not your priority, fixed and guaranteed returns are
Mutual funds rarely offer consistent returns to their holders. If consistent and guaranteed returns is what you are looking for then you should stay away from Mutual Funds – Safest of the Mutual Funds (Debt Funds) can also be volatile depending on Interest rate cycles. We always recommend prioritizing long-term wealth over short-term guaranteed returns.
4. If you do not believe in Maths, Compounding and think that Earth is still Flat
The lesser said about this is better: p
5. If you are crazy rich and don’t care about beating inflation
There’re very few Asset Classes that can beat inflation in the mid to long term. Equity is surely one. Equity Mutual Fund return can be split in 2 components: Risk Free Rate + Risk Premium. Typically, an Equity based mutual fund can offer you a Risk Premium of 3-5% over a 5-10 Years holding period. Risk Free rate generally mirrors the Inflation in the economy.