2W’s of Mutual Funds

Before we talk about Mutual funds, let us know have you ever been stuck in a decision-making situation? Did you ever feel that you need to know which direction you should be going and for how long?

Whatever may be the situation these two questions ‘When and Where’ are very important. If one is able to answer both these questions then he/she has a successful roadmap ahead.

Being a financial planner, it’s my responsibility to make my readers understand 2w’s of mutual funds. Today everything is gift wrapped in the name of advertising and only limited information is passed on, which the company thinks you need to know. Investor awareness is a must, and according to me, effort should be put by everyone to know the 2w’s of mutual funds as it is our hard earned money that is getting invested.

So, when I say ‘When’ it refers to the time horizon that one should look out while investing. The investor should have clarity in his mind by when he would require his invested mutual funds amount and that ‘when’ should be measurable, which can either be in terms of days, months or years.

Your ‘Where’ always depends upon your ‘when’ but the only expectation built up in clients mind is “to have maximum growth”.

To simplify this thought let me explain you the ‘when’ & ‘where’ in a tabular format.

Time Horizon

Types of fund

Expected return

1-180 days

Liquid & Liquid Plus fund.

6.5 % – 7.5 %

6 – 18 months

Short term debt funds

7.5 % – 8 %

18 – 36 months

Long term debt funds

8 % – 9 %

3 – 5 Years

MIP/Dynamic Bond Funds

8.5 % – 10 %

5 – 7 Years

Balanced Funds

10 % – 12 %

7 – 10 Years

Large Cap Funds/Nifty ETF

12 % – 15 %

10 – 15 Years

Multi-Cap / Mid – Cap Funds

15 % – 18 %

15 Years & Above

Mid – Cap/Small Cap Funds

18% & above

In the above-given table, the mentioned ‘expected returns’ according to the ‘time horizon’ should actually be your expectations. After seeing the table I am sure, some might have felt that at times the particular category of mutual funds may give returns way above the expected returns mentioned.

True it is very much possible, but then that should not be set as your new expected returns because most of the times on the short term rally and the past performance these new expected returns are shown and high hopes are built up by advisors, agents, advertisements, even family and friends some time because of less experience.

It is very important that you know your goal and based on it you make your investment decisions,

So now that you know the 2W’s that is ‘when’ & ‘where’ make a conscious effort to link your financial goals accordingly.

Do leave your comments below if you have any questions!

For everything else, Money Anna is always around!