Ensuring mutual funds sahi hai

Thanks to the superstars-fuelled media blitz on our TV screens, outside hoardings and dailies, we all know Mutual Funds Sahi Hai. But a few recent ugly episodes have punctured their Sahi Hai tag. The Franklin saga in 2020 and the recent frontrunning scandal at Axis build a case for the doubting Thomases. Yet, despite such knockdowns, mutual funds are ostensibly safe, the regulations are tight, and there's no room for fly-by-night operators. Sure, your mutual fund investments can lose you money, but mostly on account of your choices and the market performance, not a scam. So, let's revisit some of the basic principles to ensure you give your mutual fund investments the best-possible chance to grow. Don't chase high returns blindly As counterintuitive as it may sound, chasing an investment delivering the best returns could backfire. But doesn't this contradict the whole premise of investing? Not really. An ideal investment product is the one that suits you well. Many investors fail to realise that the best returns are often accompanied by hidden risks that may not be visible upfront, particularly in debt funds. On the debt side, your primary goal should be protecting your money, not high returns. For larger gains, equity should be your go-to asset class. Investors who understand this were probably not impacted when Franklin shut six debt schemes in April 2020, collectively managing assets worth more than Rs 25,000 crore. Until then, these funds stood out for their returns. Why? Large exposure to lower-rated securities. Since such securities are more prone to defaults, they provide higher returns to compensate for the additional risks. And everything was going well until COVID-19 hit and