Moneycontrol
Last Updated : Oct 03, 2018 06:52 PM IST | Source: Moneycontrol.com

3-point analysis | Should you let go of mutual funds and invest in fixed deposits?

In 2017, multi-cap funds delivered 36% returns, while mid-caps delivered 43.1%. If you have invested keeping these numbers in mind, you're in for a rude shock.

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If you're worried about incurring losses on your investments in mutual funds, then you are probably not alone. There are many investors who dumped their steady fixed deposits for more enticing equity mutual funds and debt funds, but are now regretting their move. Here's a three-point analysis on whether you should go back to investing in FDs.

Let's start with what exactly happened to equity schemes. In 2017, multi-cap funds delivered 36 percent returns while mid-cap funds delivered 43.1 percent. If you had these numbers in mind, while investing then you're in for a rude shock. Multi-cap funds as a category lost 8.4 percent in the past one month itself, whereas mid-caps lost 11.3 percent during the same period.

Debt funds faced redemption uncertainty over the future of IL&FS and some of its group companies, which recently defaulted and are now wreaking havoc with the credit market. Moreover, panic in the fixed income market due to default, led to a liquidity freeze. According to bond dealers, the liquidity deficit is currently estimated at Rs 20,000 crore to Rs 30,000 crore.

So what do you do? As with all mutual funds, there are no guarantees in debt funds and equity schemes and many times investors ignore these risks. But fixed deposits are one of the safest avenues for investors in India with almost negligible chance of default.

So here are a few things to keep in mind - Ascertain your risk profile and invest accordingly and if you need money over a short period of time then stick to fixed deposits. Long-term investments can be locked in mutual funds so that the risks can be ridden out. Also, consider shifting to multi-cap funds and large-cap funds which have lower volatility.
First Published on Oct 3, 2018 06:52 pm
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