Good funds, bad timing?

Summary: Many mutual fund investors obsess over choosing the best fund, overlooking the importance of time. Here’s why your investment horizon matters while deciding which equity fund to invest in. Arnav, 23, wanted to kickstart his mutual fund investing journey. Like many first-time investors, he did what seemed logical: he searched for the ‘best equity mutual fund’. After hours of reading rankings and past-return tables, he settled on a small-cap fund. He started investing Rs 10,000 every month through SIPs. A year later, he checked his portfolio, only to find it was down nearly 10 per cent. “But this was supposed to be the best small-cap fund,” he thought, puzzled. “Why am I in the red, then? Maybe I should just sell.” Arnav isn’t alone. Many investors choose equity funds largely based on past performance. That is not entirely wrong, but it misses a more important factor: time. Equity investing does not reward short horizons. Even the best funds can deliver negative returns over one or two years. Without sufficient time for markets to recover, a good fund can quickly become a bad experience. The table provided below illustrates this with uncomfortable clarity. Investing in equity for the short term? You are in danger Equity funds have a high likelihood of delivering negative returns during short periods of time Fund category 1 year (%) 3 year (%) 5 year (%) 7 year (%) Short duration 0 0 0 0 Aggressive hybrid 14.7 1.9 0 0 Flexi-cap 19.6 2.4 0.3 0 Large-cap 20.8 2.1 0.5 0 Mid-cap 20.2 3.9 0.6 0

This article was originally published on February 19, 2026.