Should you move out of mutual funds and invest in fixed deposits?

Henil Shah
/ Categories: MF Unlocked

If we look at the average returns provided by the major categories in the equity-oriented mutual funds in 2017 then they are as large-cap funds provided 31.28 per cent, multi-cap funds provided 37.77 per cent, mid-cap funds provided 43.77 per cent and small-cap funds provided 55.53 per cent. If people invested with just looking at these numbers then they may face a reality shock with how they are performing now. Large-cap, multi-cap, mid-cap and small-cap have lost on an average 7.51 per cent, 8.75 per cent, 11.28 per cent and 12.15 per cent, respectively, in the last month.

Even the debt-oriented mutual funds such as short duration funds, medium duration funds, corporate bond funds and credit risk funds have lost on an average 0.04 per cent, 0.27 per cent, 0.25 per cent and 0.42 per cent, respectively, in the last month. Also, there were many redemption in debt-oriented mutual funds due to the IL&FS fiasco.

Mutual funds, be it equity mutual funds or debt mutual funds have no guarantees and investors usually ignore these factors. Fixed deposits, unlike mutual funds, are one of the safest avenues for investment as they have negligible chances of default. But this doesn’t make mutual funds a bad avenue either.

So before investing it is really very important to assess your risk profile and your requirements and then choose the investment avenue which would suit your risk profile and requirements. Depending upon the risk profile, for any short-term requirements you may lock your money into fixed deposits but for the long-term time, horizon parking money into mutual funds would be a good idea.

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