I have invested around Rs 3 lakh in Reliance Regular Savings Equity, IDFC Premier Equity and Sundaram Select Focus. I had invested in these funds when they were top performers, but now they appear at the bottom of the pyramid. This led me to analyse the consistency of fund performance and I observed that most funds are not performing consistently. In this situation how can one select a fund, as past performance would be having wide variations?
-Nirav Dadhania
The lesson here is 'Don't chase performance'. Chasing performance will not lead to effective investments. A wise approach to investing entails a well researched portfolio that leads to your goal. And more importantly, investing is a long term proposition.
Equities are suitable for the long term from the point of view of their ability to generate returns. However, along with the potential to generate superior returns, they are also the most volatile asset class. So the performance of equity funds in the short term should not influence your investing decisions and a disciplined approach should be maintained. So don't get carried away by very recent performance.
As far as selecting a fund is considered, it is always better to invest in well-established funds. The key word here is LONG TERM. A good and consistent performance record over the long term is what must be looked for before investing in a fund.
This article was originally published on March 03, 2009.
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