Should I choose a fund that has given 14% over 15 years or one which has given 22% over 3 years?
Transcript: Both returns are of past performance. 14% return over the last 15 years means that this fund has witnessed the big ups and downs in the market. 15 years is a long period and we have seen two booms in that cycle.
In the last three years, the fund has only seen a good time. Markets are cyclical and every fund will witness a lean time as well. It also depends whether the same fund manager has been around the fund generating 14% returns. Has he been there all through? If not, you will have to really take it with a pinch of salt.
This is a time to remind viewers about the statutory warning that past performance is no indicator of future performance. I think the answer lies in understanding the fund, going through the same method of choosing the right fund. And, performance should not be the only criteria based on which you choose a fund.