Best Performing Mutual Funds

Best Performing Mutual Funds 5.00/5 (100.00%) 4 votes

Mutual funds are the preferred choice for folks who are wary of other forms of investments. For example, real estate qualifies as a mutual_fundssurefire investment with high returns, but it needs a fixed long-term commitment and timing is essential. Similarly, stocks can make you unimaginably rich, but then it rides on the constant risk that everything could go wrong and you could go bankrupt. If you are the tortoise in the proverbial story with a slow and steady approach towards building wealth, say yes to mutual funds.

Mutual funds offer the following advantages:

  • They encourage small investors to make regular periodic investments with as little as $500.
  • They bring better yields because they earn average returns from their portfolios.
  • They diversify risk and protect from “all eggs in one basket” syndrome.
  • They are easy to invest and exit.

Mutual funds are of three basic types – equity, debt and hybrid. Equity funds invest in stocks of companies, debt funds pick up fixed-interest securities like corporate or government bonds and hybrid funds have a mix of the two.

If you wish to understand performance of mutual funds, here are a few guidelines:

  • Equity funds yield higher returns than debt funds. However, performance of equity funds is linked to the underlying stocks. Therefore, the companies and the sectors in which they operate become the key factors. The business cycle influences performance of companies.
  • Index funds seek to earn returns close to market induces. Rating agencies like Standard & Poor and Moody’s release average index of expected returns for different risk profiles. Index funds usually have low expenses ratio and give stable returns.
  • The net asset value is a good indicator of the real value of the portfolio. Financial dailies and websites publish the NAVs daily and weekly. Tracking the NAV gives you enough basis for arriving at buy or sell decisions.
  • Remember that performance of mutual funds should be compared across companies and time periods. Performance results are available over 3-month, 6-month, year-to-date and 5-year periods. Weigh the schemes depending on your specific investment objectives.
  • Always seek professional advice in case of doubt.