Why should one not be bothered by volatility in mutual funds?


Mutual Funds Sahi Hai?

During a long drive, do you worry about your speed or the destination and how to get there? Obviously, you don’t count the bumps but focus on reaching your destination safely in time. The same goes with Mutual Funds. You shouldn’t worry about the daily NAV fluctuations but rather focus on whether it is taking you closer to the financial goal in the time you have set for it.

During the drive, there are numerous times when your speed drops to near zero, but the vehicle picks up speed once you get over the bump and continue your journey. At the end of the trip, what matters is the average speed you clocked to reach your destination. Similarly, a mutual fund can have numerous bumps in the short-term but the longer you stay invested, the impact of these fluctuations decrease and your chances of earning a positive return goes up just like your car’s average speed during a long trip. 

Every economy and hence market go through periods of growth and recession which impact your fund’s return but only in the short-term. Over the long-term, your fund would have gone through several such bouts of ups and downs, but their impact would be muted because it’s the long-term compounded total return that will count at the end of your investment journey. 

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