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Equity funds – Long on expectations… - Views on News from Equitymaster
 
 
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  • May 30, 2001

    Equity funds – Long on expectations…

    Growth (equity) fund investors who had invested about a year ago are driven to despair. They now want to exit and park their funds in ‘safer’ investment avenues like fixed deposits.

    A lot of investors who invested in equity funds earlier were not of the right age profile. They were a little too old to be in equity funds in the first place. And after having invested in them they thought that equity funds were a scheme to double-the-investment in-half-the-time. This isn’t exactly their fault because equity funds, in particular technology funds, were certainly marketed that way.

    Rarely do we find growth fund investors who have understood the mechanics of growth funds. For most investors, growth funds are no-risk or moderate risk investments. The truth is growth funds are anything but that. Again for most investors growth funds are 6 to 12-month investments. They are wrong on that count too. Liquid funds are for 6 to 12 months, certainly not growth funds. Growth funds can be expected to outperform other investment avenues (bonds, bank FDs, gold, property) only if the investor is in for the long haul, which is at least 4-5 years.

    Investor disappointment at the current state of affairs is understandable. This only highlights that there needs to be an investor education process in place, if the mutual fund industry has to gain widespread acceptance. Association of Mutual Funds in India (AMFI) has taken the lead (as it is expected to) by introducing the certification course for mutual fund employees and agents. Once this investor education process pick momentum, then hopefully there will be fewer disgruntled investors in the country.

     

     

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