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Can mutual funds double my money like bank deposits?
Dhirendra Kumar makes a case for wealth creation through mutual funds
Oct 11, 2019
By investing Rs 10,000 in bank, our money gets doubled in eight years. Is there a chance to double or triple my investment in mutual funds?
- Hira Lal
This is a most important question. The direct answer to this is that with bank deposits there is a guarantee of earning double or more than the invested amount, and in this lies the very charm of bank deposits. A bank manager at the very beginning of making the investment gives you in writing the amount that you will receive on maturity.
With a time horizon of eight years, there is a chance that an aggressive hybrid (balanced) fund might double or triple or substantially enhance your investments. However, there is no guarantee here because there can be phases when the amount might rise or even fall depending on the market.
Having said that, with a time horizon of seven to eight years, I'm quite hopeful that mutual funds will be able to provide you with a return over and above bank deposits. The important thing to keep in mind is that unlike with bank deposits, with mutual funds, you shouldn't invest all your money at one go. To be able to sail through the volatility of the markets, spread your investments over a period of time. Thus, invest through the SIP route to average out your investment cost.