Why should you invest in equity oriented mutual funds?

This is the first of a two part series. In this first part, we’ll examine how high performing Equity Oriented Mutual Funds have given eye-popping returns (at times in excess of 20% annually) over very extended timeframes, making them arguably the best suited instrument for long term wealth creation for retail investors. In the second part, we’ll examine how today’s best performing funds aren’t necessarily going to be so forever, and hence why the only way to sustain the superlative returns that equity mutual funds are known to generate is by investing in…Continue reading →

A quick introduction to the concept of asset classes

My uncle recently bought some units of Government bonds with an average maturity of over 15 years. I casually asked – “you do know the risks involved in this investment?”. His answer left me a bit unnerved! He thought that it was a completely risk-free investment since Government never defaults. Wrong! Even if we assume that Government will never default (actually they could), the investment is risk free only if it is held till maturity. And here we are talking about a maturity of over 15 years. Unknowingly, my uncle had taken a…Continue reading →

Different types of investment risks and factors that drive them

The simplest (and yet the most powerful) definition of risk is the chance that an investment’s actual return will be different than the expected return (explained in detail here). The factors that drive this risk also help us categorise it into various buckets. Throughout this article, we will use 3 different types of investment option to illustrate investment risks – shares of an automobile manufacturer (AM), bonds of an infrastructure company (IC), a house in suburbs of Mumbai purchased for investment purpose (RE). While there are various types of investment risks, for the…Continue reading →