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All my mutual funds are underperforming. Should I continue with them?

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Last Updated: Oct 31, 2019, 02.03 PM IST|Original: Oct 31, 2019, 02.03 PM IST
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I had invested Rs 2 lakh each in Axis Long Term Equity Fund, Canara Robeco Emerging Equities Fund, HDFC Small Cap Fund, Kotak Standard Multicap Fund, and Nippon India Large Cap Fund in June 2019.

All my mutual funds are underperforming. I had invested for a period of seven years to create wealth. Please suggest what should I do.
--Gaurav Bansal

Gaurav Monga, Director, PxG Consultants, responds:

You have chosen good mutual fund schemes. Four months are too short to evaluate the performance of equity mutual funds.

You should be prepared to face volatility in the short term while investing in equities. You cannot eliminate the risk entirely, but can reduce it and volatility by spreading the investment over a period of time. It will average the purchase cost of equity equity mutual funds.

As you have an investment horizon of seven years, you can invest in equity mutual funds to create wealth. Equity schemes have the potential to offer 12 to 15% annual returns.

You should continue to hold the investments for at least seven years. Embrace the short-term volatility, keep a track of the schemes and review your portfolio every year.

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