Could you give me a list of top diversified equity funds and how they have performed in certain turbulent times like 9/11, the "May Mayhem" and other such events?
R. Janakiraman
When it comes to equity investing, if there is a singular philosophy that we have consistently advocated, then it has to be that of long-term investing.
One can either be a speculator/trader or a value investor and we can tell you that in the long-term you are much more likely to multiply your wealth if you belong to the latter category.
Events like 9/11 or the "May Mayhem" or even stock scams are all equivalent to noise for a value investor (whether investing directly into stocks or indirectly through diversified equity mutual funds). In the long run, short-term fluctuations lose their significance. If you are not yet convinced, then take a look at the table where the returns of five 5-star funds have been tracked since their launch.
Franklin India Bluechip's near 26 per cent return since launch implies that if you had invested Rs 10,000 in the fund at the beginning of 1995 then by the end of 2004 it would have grown to Rs 79,305, i.e., it would have multiplied a phenomenal eight times in 10 years. And mind you this includes a large number of short-term shocks, including stock scams, which might have caused the stock markets (and hence the NAVs) to tumble. This, in short, is the value of long-term investing.
So we suggest that stop bothering about macroeconomic shocks and stick to monitoring your investments. Essentially, a mutual fund should not under-perform the market, i.e. in rising markets generate at least the market returns and in falling markets not loose more than the market. Do not ignore other criteria used to choose between good performing funds but broadly speaking as long as this particular objective is met, your investments are doing decently and in the long-term you should earn healthy returns.
This article was originally published on October 06, 2004.
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