I want 20% returns in 3 years. Possible?

Let’s find out which fund categories can consistently deliver more than 20 per cent returns over three years – and the risks associated.

Sameer had Rs 10 lakh, three years and a plan that sounded... ambitious.

“Equity mutual funds,” he told his friend Arjun over lunch. “Three years. Hoping for a 20 per cent annual return. Nothing too risky, just want it to grow steadily and safely.”

Arjun smiled and raised an eyebrow. “So you’re aiming for high returns, low risk, capital safety and full liquidity — all in three years? That’s quite a wishlist. It’s like ordering 10 desserts and no calories.”

Which funds will give over 20 per cent returns?

Arjun pulled out his tablet and found that small-cap and mid-cap funds have delivered more than 20 per cent returns about half the time over any three-year period in the last 10 years.

This knowledge added a glint to Sameer’s eyes.

“That’s huge,” he said.

He quickly opened the calculator on his phone. “At 20 per cent CAGR, my Rs 10 lakh becomes Rs 17.28 lakh in three years. That’s exactly what I need.”

Arjun nodded. “It is. But do you know what their worst-case performances are?”

“Small-cap funds fell 11.96 per cent over a three-year period in the last 10 years. So, in the worst-case scenario, your Rs 10 lakh would get reduced to Rs 6.82 lakh. Mid-cap funds are no better, falling negative 9.16 per cent annually in their worst stretch. That’s Rs 7.49 lakh.”

Sameer now wore a scowl on his face. “That’s rough”

“And here’s the thing,” Arjun continued. “These same categories also show up the most in the negative return periods. Small-cap funds have delivered negative returns about 10 per cent of the time during a three-year period. That means there is a one-in-10 chance a small-cap investment turns negative.”

When best-case thinking backfires

“But… I thought equity’s for the long term,” Sameer protested.

“Exactly,” Arjun said. “And three years isn’t long term. It’s just long enough to get unlucky.”

“But I wasn’t looking for aggressive bets,” Sameer muttered. “I just wanted something safe that grows well.”

“No,” Arjun said. “You wanted high returns with low risk. You weren’t looking for an investment; you wanted a miracle.”

Sameer laughed, finally conceding. “So, what’s the fix?”

The grown-up plan

“If you truly need this money in three years, equities shouldn’t be the core. Use short-duration debt funds or target-maturity funds. They’re not exciting, but they’re reliable. And reliability is exactly what you need when there’s a countdown on your calendar”

Sameer listened closely.

“In fact,” Arjun continued, “short-duration funds have shown zero instances of negative returns over any three-year period in the last 10 years. And in 95 per cent of the cases, their returns were between five and 10 per cent. That kind of consistency is rare in the investment world. It’s boring. But beautifully boring.”

Sameer nodded.

“And if you still want to invest in equity,” Arjun said, “then respect its temperament. Five years minimum for large caps. And seven or more if you’re thinking mid-cap or small-cap funds. These are not sprint vehicles. They are long-haul trains.”

Sameer slowly pushed his untouched dessert toward Arjun. “Here. Take this. I think I’ve had enough sugar for one plan.”

Arjun smiled. “That’s your best-performing asset today”

Because investing isn’t about cherry-picking the highlights. It’s about bracing for the full reel. Especially when your deadline is just three years away.

Also read: Planning to start Rs 25,000 SIP? Invest in these 3 funds