Getty ImagesI want to start investing in mutual funds for the next 30 years through SIP. Please tell me which is the best fund to start with? I am considering the following funds, which one is good to invest for the long run?
Axis Bluechip Fund
ICICI Prudential Bluechip Fund
Nippon India Large Cap Fund
Canara Robeco Bluechip Equity Fund
HDFC Top 100 Fund
Mirae Asset Largecap Fund
--Ramesh Babu
Ashish Modani, founder, SLA Financial Solutions, responds:
At the outset, let me tell you that I can see one good thing and one bad thing in your question. Good thing is that you want to invest for the long term and the bad thing is that you want to invest in the best funds to start with. Most investors commit this mistake and then they lose their way in their long-term journey of wealth creation.
Just for example, in the list of your schemes, Axis Bluechip comes first. This scheme was one of the worst performing schemes in 2016-17. Had you started that time, would you dare to choose Axis? I am sure you would not. But if one did not invest in the scheme at that time, the returns you see today from Axis would not have come at all. Only those investors who invested during bad times actually get great returns.
The point I am trying to make is it is not the best fund but your strategy that counts in the next three decades. Asking for good schemes for the next 30 years is like asking your doctor which medicine you would advise for my high BP for the next 30 years.
Also, somehow people have misunderstood that if they run their SIP for the long term, all their problems will get sorted. SIP is just a way of investing. Over a period of time, your accumulated money will act like lump sum and additional money invested through SIP will keep losing its significance. What works over the long run is asset allocation and discipline. Have a portfolio which is well balanced and keep rebalancing it at regular intervals.
Funds which are 5-star rated were once single star. So, don't judge your portfolio by highly-rated funds. What funds you have will hardly have any insignificance over the long run. Over 30 years, you probably would see three or four downfalls which may erode your valuation by 50% or more. It is not going to be a surprise for markets but definitely for many investors. Also, markets will show many euphoria where investors tend to chase momentum stocks and schemes. Those investors who can have control over greed and fear are the ones who would make money. Rest will not. Most investors do check what returns funds have given in the past, but they do not know how much return investors make from those best schemes.
For more, read: Will the best mutual fund offer you the best returns
Hope this clarifies some of your misconceptions about investing in mutual funds. I would say - Chase your dreams, not returns!
ETMutualFunds.com adds: We always ask our readers to choose mutual funds based on their financial goals, investment horizon, and risk profile. Since you have identified your goal and horizon, you should assess your risk profile. Once you know your risk profile, you may proceed to choose mutual funds that are in line with your risk profile. For example, if you have a conservative risk profile, you must invest mostly in large cap mutual funds. Similarly, if you have a moderate risk appetite, you should invest mostly in multi cap mutual funds.
Axis Bluechip Fund
ICICI Prudential Bluechip Fund
Nippon India Large Cap Fund
Canara Robeco Bluechip Equity Fund
HDFC Top 100 Fund
Mirae Asset Largecap Fund
--Ramesh Babu
Ashish Modani, founder, SLA Financial Solutions, responds:
At the outset, let me tell you that I can see one good thing and one bad thing in your question. Good thing is that you want to invest for the long term and the bad thing is that you want to invest in the best funds to start with. Most investors commit this mistake and then they lose their way in their long-term journey of wealth creation.
Just for example, in the list of your schemes, Axis Bluechip comes first. This scheme was one of the worst performing schemes in 2016-17. Had you started that time, would you dare to choose Axis? I am sure you would not. But if one did not invest in the scheme at that time, the returns you see today from Axis would not have come at all. Only those investors who invested during bad times actually get great returns.
The point I am trying to make is it is not the best fund but your strategy that counts in the next three decades. Asking for good schemes for the next 30 years is like asking your doctor which medicine you would advise for my high BP for the next 30 years.
Also, somehow people have misunderstood that if they run their SIP for the long term, all their problems will get sorted. SIP is just a way of investing. Over a period of time, your accumulated money will act like lump sum and additional money invested through SIP will keep losing its significance. What works over the long run is asset allocation and discipline. Have a portfolio which is well balanced and keep rebalancing it at regular intervals.
Funds which are 5-star rated were once single star. So, don't judge your portfolio by highly-rated funds. What funds you have will hardly have any insignificance over the long run. Over 30 years, you probably would see three or four downfalls which may erode your valuation by 50% or more. It is not going to be a surprise for markets but definitely for many investors. Also, markets will show many euphoria where investors tend to chase momentum stocks and schemes. Those investors who can have control over greed and fear are the ones who would make money. Rest will not. Most investors do check what returns funds have given in the past, but they do not know how much return investors make from those best schemes.
For more, read: Will the best mutual fund offer you the best returns
Hope this clarifies some of your misconceptions about investing in mutual funds. I would say - Chase your dreams, not returns!
ETMutualFunds.com adds: We always ask our readers to choose mutual funds based on their financial goals, investment horizon, and risk profile. Since you have identified your goal and horizon, you should assess your risk profile. Once you know your risk profile, you may proceed to choose mutual funds that are in line with your risk profile. For example, if you have a conservative risk profile, you must invest mostly in large cap mutual funds. Similarly, if you have a moderate risk appetite, you should invest mostly in multi cap mutual funds.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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