Why your Best mutual fund is not Best fund For Ever.
Stagnant water smells, but flowing river does not smell.
Once upon a time, there lived a rich man. He was very rich and prosperous. But he was very miser and he never wanted to help any poor person. One day a priest came to him and asked him to dig up two wells – one for him (priest) and the second for himself. As per the order, the rich man dug up two wells. One in the name of priest and other in the name of himself. The priest warned the man, if the water of his (priest) well’s reduces, then the priest will be going to own the entire wealth of the Rich man. The rich man got scared from priest’s warning, and he closed the well of the priest, so that nobody could get water from priest’s well. The rich man allowed the poor people, to take water from his tank. So, the water in his well reduced.
After a span of 5 years, the priest came back to the village, to inspect the water in the wells. He found that the water in the priest’s well reduced, while that of the rich man’s well increased and was much more than the priest’s well.
The rich man was shocked with the result. Then the priest explains to him that if you close something, then there will no growth, but if you let the things move then they not only will they grow, but also they will get multiplied over a period of time.
The same rule applies to mutual funds also. If you neglect the investment after investing in some plans and do not monitor it, the chances are that they will not perform and you may incur losses. But if you, monitor your funds, and make necessary churning, then only they will give you profits.
That is the major reason for “why your best mutual funds are not best for ever” .
Here are some facts which need consideration :
- The past performance of the fund, does not guarantee the future returns.
- The expense involves the payment of management fees, commissions, expenses on advertising, and other expenses during investment process.
- The market needs regular watch, as it is uncertain in nature and no one can predict the returns.
- Change in Fund managers according to the needs.
- The segment of the market in which the mutual fund manager invests.
So, one needs to watch at regular intervals (but not frequently) the performance of the mutual funds. A proper study and regular watch will result in good and handful returns.
And if your best mutual funds are still not best, then you have the options of redemption, switch overs as well as reinvestment of that fund.