Don’t Expect High Returns in Mutual Fund SIP over short term

Don't Expect High Returns in Mutual Fund SIP over short termThere has been plenty of talk about the falling returns from mutual funds with most funds posting negative returns for one year duration. In the case of systematic investment plans (SIP), the picture is no different, though investor gets to invest over different market periods. However, the negative returns from SIPs can’t be blamed as they generally tend to offer handsome returns over the long run.

On the other hand, in a booming market environment, even SIPs tend to give excellent returns. Needless to say, many investors were used to such whopping profits from SIPs even over the short term, and hence, the current market environment has been a cause for worry.

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Mutual funds tend to outperform direct equity investments over the long term, but, during the short term, are prone to higher erosion . Unfortunately for many investors, mutual funds are expected to outperform stocks or the index even during the short term and hence jittery over their negative returns.

The fundamental principle of mutual fund investments should be a long horizon as history has shown that over a period of 7-10 years, funds have managed to post a better show. So an investor, at the time of investing, needs to be clear about his investment goals and opt for a portfolio of two to three Mutual fund Schemes according to his risk appetite. Then start investing in those funds in SIP route alleast for the period of around 7 to 10 years. This strategy would surely beat the market and fetch you a return of around 15% to 25% per annum.

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