With Bank Fixed Deposits giving only 5%-6% returns per annum and Insurance schemes giving only 6%-8% returns per annum with long lock in periods, mutual funds are a great alternative to Bank Fixed Deposits and Insurance Schemes.
Many good Equity based mutual funds have given over 12% per annum returns over the last five, ten years and more. Although giving a guarantee of returns on mutual funds is illegal in India, one can safely expect a return of 10%-15% per annum (Compounded Annual Growth Rate) over a period of five, ten years or more, based on empirical evidence.
In addition to this, investors in mutual funds get the benefits of professional management of their investments with low fees and good diversification in a basket of stocks. And investors don’t have to invest lumpsum amounts. Infact it is recommended that investments in Mutual Funds should be made in monthly instalments over a prolonged period to save for long term goals.
The probability of losing money in mutual funds over prolonged periods of five to ten years or more is practically zero. This makes mutual funds an ideal investment tool to save for retirement, children’s higher education, children’s wedding and other long term goals.
Please note that proper selection of mutual fund schemes, regular monitoring and review of the schemes is necessary to achieve desired results. You must consult a Financial Advisor before investing.
