MFs To Help Plan Life-Time Cash Flows

If you want to earn a decent return on your investment, it is time in the market that is more important than timing the market. Various studies worldwide vindicate this. According to one of the studies, CGM Focus (CGMFX) was the highest-return equity fund from 2000 through 2010 in USA. It had an average annual return of 18.2%, beating its closest rival by 3.4%. During the same time, the fund’s typical shareholders lost 10%. Investors, motivated by greed and fear, added heavily to the fund near the top and exited as the fund neared its bottom. This shows the importance of remaining invested, irrespective of market conditions. 

The Indian mutual fund investor seems to be imbibing the importance of time in the market and this is reflected in the latest mutual investment numbers. Despite the fall in the equity markets and the resultant loss in their portfolios, investors continued to repose their faith in MFs. 

The net inflows into equity funds in the month of October were highest in the last seven months. Even investments through systematic investment plans (SIPs) also hit the highest ever mark and were close to Rs8000 crore. This is against the backdrop of the frontline equity indices falling by more than 5 per cent in the month of October. 

Besides helping you to earn good returns over a longer period of time, mutual funds can also help you to achieve your financial goals and plan your lifetime cash flows. If you plan properly, you can double your income and retire early. Our cover story in this issue goes into the details and analyses different scenarios when and how you can use mutual fund investments to earn that extra income for you. In one of our special reports, we have explained how you can use liquid debt funds to improve your returns, instead of just parking your funds in savings bank account. 

Hope this issue will help you take wise investment decisions.