One of the hottest investment options today, mutual funds investment plans are constantly browsed by investors to see the best one that fits their needs. The fact that you can invest in mutual funds online through a Systematic Investment Plan makes them even more popular. Further, you can also choose your SIP online. Therefore, the ease of investing coupled with the prospect of great returns makes mutual funds a great investment option.
Given the constant growth in mutual fund investment, tracking the performance of a mutual fund is a hot topic among investors these days. Unless you track the performance of your mutual fund, how will you know if it aligns with your goals? Let’s understand the concept of tracking your mutual fund’s performance through an easy example.
Let’s say Raj has a goal to send his daughter overseas for higher education after 15 years. Let’s say the cost of sending his daughter is Rs.25 lakhs as of today. Generally, when you have an investment horizon of up to three years, you should invest in debt funds. In the case of 3-5 years, you should go for balanced funds, 5-7 years, largecaps, 7-10 years, multicaps, and more than 10 years, midcaps and smallcaps. Going by that, Raj must invest into midcap and smallcap funds. These funds generally provide annual returns of around 15%. Raj must review his fund individually as well as with the most popular funds in its category.
The first step for Raj is to calculate the future cost of his goal. Online goal planners will be a good tool for him to understand how much the monthly SIP amount should be to achieve his goal in 15 years. Given the inflation factor, Raj’s goal will cost him around Rs.70 lakhs after 15 years. Thus, he will need that corpus after 15 years to send his daughter overseas. Thus, he needs to invest around Rs.10,500 per month in SIPs to achieve that goal. Moreover, he needs to ensure that the fund he chooses gives him around 15% returns as well. Therefore, monitoring the performance of the fund is crucial.
If the fund is not performing well in three consecutive quarters, he may need to change over to another fund. One of the best ways to track his fund is through the online dashboard of his broker. He needs to check the NAV at regular intervals. He also needs to keep himself well-informed on what’s happening in the markets and the economy, and how it can affect his fund’s performance. Further, he needs to be on top of his mutual funds investment to ensure that he is getting the returns he planned. If he doesn’t do that, he runs the risk of not building the corpus he requires.
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Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.