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Do different types of Mutual Fund schemes offer different kinds of returns?

“Why should one invest in Mutual Funds? We keep hearing about poor performance of many Mutual Funds. And Mutual Funds offer no guarantees. Given these limitations, is there any reason why someone should consider investing in Mutual Funds at all? Do they perform at all?”

Well, often there are versions of this question, asked by existing as well as potential Mutual Fund investors.

Whereas the question might be similar in many cases, the origin of the question, the reason why such a question arose could be very different across different individuals.

In one of the cases, the investor thought that the scheme he had invested in was not delivering investment returns as much as what he had expected. However, when probed, it was found that the investor was comparing two completely different schemes. This is like comparing apples with oranges – not the right approach.

In another case, the investor had invested in a scheme, where the overall market was going through turmoil. When someone is stuck in a traffic jam, however great a driver or however great a car, there is no way to speed up. Exactly the same thing happens when the overall market is not good. In such a case, as in case of a traffic jam, one has to wait till things clear out.

In most situations, the Mutual Funds are perceived to be not performing well when the way of looking could be incorrect.