A simple investment that really works

We do not know what the future holds. A good investment should be able to bring a smile on your lips for having taken the ‘right’ course in the face of uncertainty. What is this investment?

Equity mutual funds have proven to be profitable long-term investments for individuals. The best part of mutual funds is that you have to just sit back and relax while a team of professional investors does all the research and investing on your behalf. Your money is pooled with many others to take advantage of investments you normally do not have access to. Mutual funds promote good habits of savings and investments. They have protected countless individuals against costly mistakes in the stock markets. It pays to invest in mutual funds because they have a way of spreading your risks into different assets and strategies. Investing in mutual funds helps you in getting you where you want to be.

Are Mutual Funds Risky?

Every type of investment including mutual funds involves some degree of risk. Yes, mutual fund investments are subject to market risks. But, remember, risk does not mean danger—it means not knowing what the future holds. When you invest, you are not managing your today’s wealth; it is your future that you are really managing. Whether you like it or not you have to take some amount of risk. For without risk, there is no return. All mutual funds are not equally risky. You have a wide range; from very low risk to very high risk mutual funds to choose from. The investment objective, the investment pattern and its holdings determine how risky your fund is. Higher risks are usually taken with the expectation of earning higher returns. It brings along higher degree of fluctuation or volatility. If your holding period is long enough you can successfully overcome the short-term fluctuations thereby effectively managing the inherent risk. There are different levels of risk to choose from. You just have to figure out the level of risk you can comfortably take and invest accordingly.


Great Potential for Higher Returns

Mutual funds do not guarantee returns. You must invest in mutual funds because they have great potential for generating higher returns for you than something that is guaranteed. Although they do not offer fixed returns, mutual funds have been gaining popularity over the past two decades. Mutual funds have created wealth for retirees, senior citizens and generally cautious investors who seek safer investment options. It pays to invest in mutual funds because they have proven to be profitable long term investments. When investing in a mutual fund you must be sure that the investment period for the mutual funds you choose matches with your investment time horizon i.e. your investment choices in order to achieve your investment goals must match with the time horizon ideally suited for that fund.


Here are six of the things that can make mutual funds work for you.

  1. Have a plan and stick to it

Why should you invest? One of the most compelling reasons is to create lasting wealth for yourself. Investing is essential in getting you where you want to be. How should you go about investing your hard-earned savings? Have a plan and stick to it. Design a portfolio you are not likely to trade. Build a portfolio you can live with. You must have a clear idea of reasonable returns you can expect to achieve over the period of your investments and the level of risk you can comfortably take. As H Stanley Judd said “A good plan is like a road map, it shows you the final destination and usually the best way to get there.”


Steadfastly hold on to your investments till you achieve your goals. Investing in absence of an investing policy reduces decision making to an event-driven process of chasing short term results. The absence of a plan steals attention away from your investment objective thereby giving up on the prospects of profitable longer term returns on invested capital. Look before you leap.

  1. Asset Allocation: The secret for wealth creation

How should you balance the risk versus reward equation? Asset allocation is all about spreading your investments across equity, debt and cash in order to suit your risk profile, investment objective and time horizon. Asset allocation is the single most important determinant of your investment success. It is the very foundation for constructing and managing your portfolio. A study of 82 large multi-asset US pension funds found that asset allocation accounted for 91.5% of their portfolio returns.


Basic Asset Allocation Model



Table I: The Nature of Annual Returns








































Table II: The Power of Asset Allocation

Value of Rs.100,000 invested . . .

Allocation %

Equity / Debt

5 yrs


5 yrs


10 yrs


100 / 0




75 / 25




50 / 50




25 / 75




0 / 100




For Table I & Table II
Equity = Nifty Index, Debt = I-Sec Sovereign Bond Index
Please Note: This is historical data for illustration purpose only.
Past performance may or may not be sustained in future.
  1. Returns expectation

Any investment programme is likely to work better if you expect normal and average returns. As Benjamin Graham, one the greatest investors ever said, “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”  It pays to have normal and reasonable expectations from your mutual funds. The biggest pitfall for you as a mutual funds investor is to demand more than average returns from your mutual funds. It is a trap which shall take you down the wrong path with undesirable results. You can happily accept “above average” returns if they were to happen in the course of your investments. But, have a clear understanding that such high returns do not go on forever. Remember, in every mutual fund advertisement the following warning appears. “Past performance is no guarantee of future results.” Please believe in it.

  1. Invest, only for the long-term

Mutual funds have proven to be profitable long-term investments.  Be ready to commit for five years or more. The odds are against you in the short-term, but, in the long run, time plays a vital role of reducing risk and enhancing your returns. The average long-term experience in investing is never surprising. But, the short-term experience is always surprising. Once you have paid for the risk, it is always a good idea to stay on for the returns. Moreover, as a long-term investor, the “Power of Compounding” is your best friend. (Albert Einstein described it as “man’s greatest discovery”). It can most certainly create lasting wealth for you.

  1. Periodically review your portfolio

It pays to periodically review the progress of your mutual funds portfolio against your investment goals. However, it is not advisable to closely monitor your mutual funds on a very frequent basis. Remember, your mutual funds are not going to perform any better just because you are tracking them very closely. But, on the contrary, it is easy to be unnerved by short-term fluctuations. You commit mistakes by taking impulsive decisions.

Frequently chopping and changing works against your investment objective to allow returns to compound over time.

  1. Rebalance your portfolio

Equity funds and debt funds perform differently at different times. Thus the proportion of debt and equity in your portfolio keeps on changing. It pays to rebalance your portfolio by selling the asset class that has done well and buying the asset class which has suffered a price decline in order to restore your asset allocation back to desired levels. Review your asset allocation every six months or once in a year.


Here’s wishing you Happy Investing! & Many Happy Returns!!


Also, read Best Mutual Funds for any Season

(Nilesh Kamerkar is the managing partner of Capital Partner)




5 years ago

This is in deed a good article.
It is meant for serious,long term,limited risk taking persons.He is not expected to check NAV,returns and NW of his investment on daily or weekly basis.More over he is a non financial person.And want his investment to grow reasonably well.

Suiketu Shah

5 years ago

MF best to be avoided.Lot fdo good long term shares to buy who can give 10 times of MF returns.MF is all nonsense where the agent and wealth management companies make more money than the investors.Stay far fart away from MF.



In Reply to Suiketu Shah 5 years ago

Mr. Shah thank you for your comments, please permit me to respond.

1) 100% agree with you that Mutual funds are not for those who can invest directly in shares and are satisfied with their results. – Mutual funds are for those individuals who do not have the time, inclination and knowhow to invest to their own. It is like a chauffer driven passenger vehicle for the convenience of those wish to avail of its services. And not for people who wish to drive on their own.

2) Also agree with you that investment in shares can give manifold returns as compared to mutual funds. But, as a percentage, successful stock investors would be in a minority when compared to the total number of individual that invest directly on their own, As the great American stock investor Philip Fisher has said “Great stocks are extremely hard to find. If they weren’t, then everyone would own them.” Because mutual fund managers find it difficult to consistently turnout good performance; it may not be right to conclude that ordinary individuals can do a better job of investing than professional fund managers.

3) Investing in mutual funds is pretty simple. It is not required to avail the services of an agent/adviser if you can do it on you own.

4) There have been instances when agents / advisers have made more money than the investors – these abuses have been identified but unfortunately those guilty of such gross misconduct have gone unpunished. These intermediaries have brought a bad name to the profession though it is a case of rotten apples in a basket full of apples. But it would be unfair to say that the entire basket is rotten.

5) If you are disenchanted with mutual funds you have every right to feel aggrieved but would like to bring to you notice that in the Indian context, mutual funds especially equity funds have created wealth for investors who have stuck with them for the long term. Sir please do take a look at the ten years history of most of the equity funds and am sure you will agree.

Hope this clarifies

Suiketu Shah

In Reply to Nilesh KAMERKAR 4 years ago

We agree to disagre.Good long term stocks are easy to pick by relying on reliable moneylife.in

It is the agents who mislead and confue investors thereby making "good stocks hard to find"

Some of good picks long term:-
2)ICICI Bank
4)M and M

Also I stick to my point of view that MF are most undesirable compared to the right shares at the right price.Most agents/brokers push their shares to earn illegal commission.The returns one can expect investing in good shares at the right time is far far higher than any mfunds.Donot compare the index with MF return.Compare the main mlue chip stocks with MF returns.The answer of the hugh discrepancy in returns lies within.

We agree to diagree.Good stocks are easy to find.

Sweena Jain

5 years ago

SEBI has messed up and played dirty with Mutual fund Industry.SEBI dare not touch bankers who have played rot with thier clients in name of managing their assets.

mam chand aggarwal

5 years ago

Regarding Mutual Funds it is not true.Present N A V is lower than the NAV of five years back.M F s have exhausted the public money.MF companies have been enjoying on public hard money.They put the investers in dolldrum.



In Reply to mam chand aggarwal 5 years ago

If you invest ‘only’ in the upper ranges or at the peak of a long bull run in an equity fund or in a sector specific equity fund (eg Infrastructure or Real Estate). Then it is very much normal to have current NAV lower than the NAV of five years back. Though it is easy for people like us to advise patience, it is extremely difficult for investors like you to go through this period of agonizing pain of marked to market losses.

Mutual Fund investors will never find themselves in doldrums if they were to follow asset allocation; periodically rebalance their portfolio and invest only for the long term.

In most of the times, 5 years is long term and good enough to generate positive returns; but in your case these five years has coincided with the peak of the bull-run which was followed by two major economic tsunamis viz. sub-prime crisis and the Eurozone crisis in quick succession.

For other issues raised by you, please refer my reply to Mr. Shah above. Thank you for your comments.


In Reply to Nilesh KAMERKAR 5 years ago

One will find defensive reason everytime for non performance.


In Reply to Nilesh KAMERKAR 5 years ago

Mr. Nilesh whether it is market or MF timing is the utmost importanat thing , so if you invested at wrong time you are sure to loose.


In Reply to Rajhans 5 years ago

Yes, non-performance does bring along justification. As an investor, it is important for you to analyse and find out what went wrong in order to avoid repeating the same mistake. In case there are valid reasons for non – performance, there’s no reason to complain.

As an equity investor you must be prepared for wide price fluctuations. You can lose, only when you choose to sell at prices that are lower than your purchase price. But, if you refuse to sell and hold on steadfastly – you just cannot lose. Problem is people normally sell because they lose patience or panic at the prospects of further fall in prices. As Benjamin Graham said “How your investments behave is much less important than how you behave.”

Timing is not so important to the investor who is willing to wait but it is extremely crucial for the speculator / trader who cannot wait for a year or two to make profits. . .

'Penalise insurance companies for harassing customers'

While ordering Apollo Munich Health Insurance to pay over Rs1.8 lakh to a policy holder for not reimbursing his treatment expenses, a Consumer Forum has asked the Finance Ministry to deal strictly with insurance companies that harass customers 

New Delhi: The Union finance ministry has been asked by a Delhi consumer forum to deal strictly with the private insurance firms and consider cancelling their licences for harassing customers and illegally rejecting their claims, reports PTI.
The East District Consumer Disputes Redressal Forum made this recommendation while ordering Apollo Munich Health Insurance Co Ltd to pay over Rs1.8 lakh to a policy holder for not reimbursing his treatment expenses and illegally cancelling his insurance cover after he submitted his claim.
"Private insurance firms are resorting to such acts just to save the amount which they are legally bound to reimburse to policy holders. This needs to be dealt with by appropriate authorities and license of such companies may be considered to be cancelled," said the forum's bench presided by NA Zaidi.
"Let copy of this order be forwarded to Secretary (Finance), Ministry of Finance, Govt. of India for perusal and strict action," it added.
The forum gave this order holding that the insurance firm "harassed and traumatised" the insured by their "unlawful action" and "illegal methods" to deny his rightful claim under the policy.
"Complainant (policy holder) of this case has been harassed, traumatised by the opposite party (Apollo Munich) by their unlawful action and illegal methods to deny rightful claim under the policy," the bench said, directing the insurance firm to reimburse the medical expenses of over Rs1.4 lakh incurred by policy holder. It also asked to pay him Rs40,000 as compensation.
The forum also comprising member T Vijayan observed that the policy holder had already been admitted for treatment prior to cancellation of his policy and refund of the premium and as he had already submitted his claim such termination "shall be deemed to be a device to deny his rightful claim." 
The order of the forum came on the plea of Delhi resident Ashok Kumar, who had bought a Health Shield insurance policy from Apollo Munich valid from 25 November 2010 to 24 November 2011 for Rs2 lakh.
Kumar had alleged that Apollo Munich had rejected his claim for medical expenses and cancelled his insurance policy after he submitted his claim for reimbursement.
The insurance firm in its defence had contended that Kumar's policy was terminated and his premium refunded as he had concealed that he was a diabetes patient.
The forum, however, rejected the contention saying the insurance firm renewed Kumar's policy not once but twice and "it was their duty to have him medically examined before renewal of the policy".



Vaibhav Dhoka

5 years ago

As most of the sectors such as Mutual fund,Insurance ,banking etc have been opened for invetment for private playes such incidences have increased many folds.Therefore all should think twice before opening other sectors in FDI.They ARE and WILL be only here for GAIN and no other intention by HOOK or CROOK method.As seen from above order.

Vaibhav Dhoka

5 years ago

As most of the sectors such as Mutual fund,Insurance ,banking etc have been opened for invetment for private playes such incidences have increased many folds.Therefore all should think twice before opening other sectors in FDI.They ARE and WILL be only here for GAIN and no other intention by HOOK or CROOK method.As seen from above order.

nagesh kini

5 years ago

The Forum's direction to the Ministry needs to be followed up vigorously.
In Medi-claim issues all the insurers are laws unto themselves and take undue pleasure in delaying and rejecting valid claims, including incentivizing their hand-maidens the TPA (who anyway ought to be done away with forthwith) to dodge claims.
I once represented at Insurance Ombudsman a very senior citizen whose claim for a trifling Rs.70,000 on the account of his dead spouse was rejected on very frivilous grounds. The insurance co and the TPA didn't put in appearance at the final hearing resulting in ex-parte ordering full claim.
Many prefer not to pursue injustice simply because the insurers only harass further - hike premium and/or delist the ailment on renewal or simply refuse to renew.
The TPA system to say the least is obnoxious and over time has proved to be a tool for harassment of hapless insureds.
It is time the IRDA implements the list of very valid suggestions submitted to its Chairman by MoneyLife. The Ministry of Finance need to ensure this.


5 years ago

I have also approached Pune additional consumer forum against Cholamandalam Ins co who have rejected claim saying that pre existing condition.Unfair trade practice and deficiency in service are my complaints.

GMR project signed under dubious conditions: Maldives President

According to Maldives President, the demand to reclaim the GMR's $500 million airport project is stemming from the fact that the agreement was not a responsible business agreement where both parties benefit

Male: Terming the controversial GMR airport project in Maldives as a 'bad contract', President Mohammed Waheed on Thursday said it was signed 'conceivably under dubious conditions' by his predecessor Mohammed Nasheed, reports PTI.
He also reacted strongly to India's concerns about developments in his country saying, "there is no reason to be concerned, since the country is fully functional and operational".
In an interview to PTI, the President said, "what is irresponsible is for Mr Nasheed to sign a contract against the wishes of the parliament. The demand to reclaim the airport is stemming from the fact that the agreement was not a responsible business agreement where both parties benefit.
"This agreement was signed during the previous government conceivably under dubious conditions. So it's not an issue with GMR, it's an issue of a bad contract." 
He was responding to a question whether the demands of his coalition parties to reclaim the project were irresponsible as alleged by his predecessor Nasheed.
Hassan also said that under the current agreement Government has to pay $1.5 million to GMR each month which is "not affordable to the Government of Maldives".
In 2010, Indian infrastructure major GMR had entered into a concession agreement with Maldivian government under the then President Nasheed to upgrade and manage Ibrahim Nasir International Airport (INIA) for a 25-year period.
The $500 million project ran into rough weather following country-wide protests by coalition of opposition political parties which had came to power after the controversial ouster of democratically elected Nasheed's government in February this year.
The parties want to reclaim the airport from GMR alleging that it was an "illegal" agreement signed by Nasheed which did not have the consent of the Parliament.
The criticism of the airport project created a diplomatic row last week when President's spokesperson Abbas Adil Raza, in a protest rally here, alleged that Indian High Commissioner D M Mulay was acting hand-in-gloves with GMR and demanded that he should go, once GMR is made to leave.
Downplaying the controversy, the President said, "The new constitution gives right to all citizens the right to express ones free will not fore bearing the office one holds. Sadly, Mr Abbas's statements reflect only his personal opinions; he said it in his personal capacity. The government has expressed its regrets even though they are his personal remarks".
Concerned over the political instability in Maldives, India had issued a press statement last month asking it to ensure a "propitious" climate for foreign investments.
"Maldives will welcome any investment from India, we want more business with India, especially more Indian shares of our main tourist market," the President said.
He also blamed supporters of Nasheed for spreading false allegations about the rise of radical Islam in the island country which is dependant on tourism.
"Maldives is one of the most diverse and socially moderate countries in the world. Yes, we are a 100 per cent Islamic country, and that's what we have been for centuries.
Maldivians are moderate Muslims not extremist," he said.
President Hassan succeeded Nasheed in February, 2012 through a controversial transfer of power.
Asserting that he had facilitated a calm and conducive environment for the Majlis (Maldivian Parliament) to function, President Hassan said the election would take place as scheduled in November 2013.




5 years ago

Does this guy know , that a multi million dollar project for the border control system of the Maldives between Immigration and Malysia's Nexbis Company ,has been also signed when it was highly criticized and even being asked to halt the project by Anti Corruption Commission....



In Reply to Hassan 5 years ago

The only thing is this was done when Dr.Waheed's brother-in-law was the immigration controller...Too bad you told the media that ACC cannot stop that project..Why? Is it becuase your empty pockets get filled with cash from Nexbizzz

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