Seema: Rohit, I’ve been reviewing my mutual funds and honestly, they’re not doing as well as I thought. Did I pick the wrong ones?
Rohit: Maybe, maybe not. Let me ask—how did you pick them?
Seema: I just looked at the funds with the highest 1-year and 3-year returns and picked those. Seemed like the obvious choice!
Rohit: That’s like buying a car just because it went the fastest last year — without checking how it performs on bad roads, what mileage it gives, or how safe it is.
Seema: (laughs) Fair point. So what should I look for?
Rohit: Instead of just looking at past returns, think long-term. Check how stable the fund is across different market conditions. Did it handle a bad year as gracefully as a good one?
Seema: But I thought returns tell everything…
Rohit: Not really. Imagine you’re choosing between two cooks. One makes amazing food but is super inconsistent. The other may not be flashy but always delivers a decent meal. Who would you trust for a family dinner?
Seema: The consistent one, of course.
Rohit: Exactly. Same goes for funds. Also, look at the fund’s risk. Some funds give high returns but take wild bets to get there. That’s like driving 140 km/hr on a city road — exciting, but not sustainable or safe.
Seema: Hmm. Makes sense. I’ve also seen some 5-star rated funds online. Should I just pick those?
Rohit: Star ratings are a helpful start — they filter out the really bad options. But you still have to do your homework. Think of it like online shopping. Just because a product has good reviews doesn’t mean it fits your size, budget, or need.
Seema: That’s true! I’ve returned a lot of those “bestsellers” myself. So what should I actually check in a fund?
Rohit: Look at things like:
How expensive the stocks in its portfolio are — like checking if you’re overpaying for groceries.
How often it changes its holdings — like constantly switching gym routines without giving any one plan time to work.
And whether it’s focused more on large, mid, or small companies — each behaves differently in different markets.
Seema: Got it. I think I was just chasing the biggest names.
Rohit: That’s common. But remember, “big” is usually temporary. Long-term wealth is built on patience and consistency.
Seema: So how often should I review my portfolio?
Rohit: Unless there’s a big change in your goals or life, once every 2-3 years is enough. Constantly switching funds is like changing your diet every week — you won’t see results.
Seema: You’re right. I’ve been treating fund selection like buying clothes on sale — just grabbing the best-looking deal.
Rohit: (laughs) Investing is more like planning your retirement wardrobe — you want quality, durability, and comfort. Not just what’s trending this season.
Seema: Rohit, you’ve officially changed how I think about mutual funds. Time to clean out the clutter and start fresh — wisely this time!
Rohit: That’s the spirit! And remember, the goal is not just to make money fast, but to keep it and grow it steadily.
Simplified Money Talks 