You should re-examine your understanding of what mutual fund investing is all about. Mutual funds are subject to market risk and there is no assurance or guarantee that the fund's objective will be met.
Moreover, past performance of the scheme do not indicate its future performance. These two lines are always written on the offer document as risk factors, but go largely unnoticed.
You seem to be overly influenced by equity funds' performance over the last year and a half and think that this is going to be sustainable.
However, your target of achieving a 20-30 per cent growth in eight months is just speculation rather than investment. Since the future in uncertain, no one knows where the equity market will be in six months or say, two years from now.
But history suggests that equities have proved to be a good investment avenue over the long-term. By long-term, we mean 3-5 years. This will help you over ride the intermittent volatility with ease and thus end up with a decent return on the investment.
The equity funds you are planning to invest in are good ones, but the problem is with the time horizon. Nothing can be said with certainty over the short time horizon that you are looking at. Consider this, the worst one-year performance of HDFC Equity has been -40 per cent and that of Franklin Bluechip has been -36 per cent.
This article was originally published on January 28, 2005.
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