When choosing mutual funds, investors often chase high returns. Yet experts stress that consistency matters more than short-term gains. A disciplined SIP approach, diversified portfolio, and steady performance across market cycles build lasting wealth. High returns may excite, but consistency ensures peace of mind and sustainable compounding over time.
The dilemma investors face
Mutual funds are among India’s most popular investment vehicles, but the recurring question remains: should one prioritize funds with the highest returns or those with consistent performance? According to experts, chasing top returns can be risky in volatile markets, while consistent performers provide stability and long-term wealth creation.
Key highlights
Consistency over spikes:
Funds that deliver steady returns across market cycles are better suited for long-term investors than those showing occasional high returns.
SIP discipline:
Systematic Investment Plans (SIPs) encourage regular contributions, helping investors ride out volatility and benefit from rupee-cost averaging.
Diversification matters:
A balanced portfolio across equity, debt, and hybrid funds reduces risk and ensures smoother performance.
High returns can mislead:
Funds with sudden spikes may falter in downturns, leaving investors anxious and eroding confidence.
Investor psychology:
Consistency provides peace of mind, reducing sleepless nights caused by unpredictable market swings.
Examples in practice:
Focused funds like HDFC Focused Fund Direct have shown strong 5-year returns (28.43%), but experts caution that long-term consistency across categories is more important than chasing one-off highs.
Why consistency matters more
High returns are attractive headlines, but they rarely sustain across decades. Wealth creation depends on compounding, which requires time, patience, and steady growth. Consistent funds help investors stay invested longer, avoiding panic exits during downturns. This disciplined approach ensures that financial goals—retirement, education, or home ownership—are met reliably.
What investors should do
Focus on funds with proven track records across 5–10 years.
Use SIPs to build wealth gradually.
Diversify across categories (large-cap, mid-cap, debt, hybrid).
Avoid chasing “flavor of the month” funds with sudden high returns.
Align fund choice with personal risk tolerance and long-term goals.
Sources: Mint, Analytics Insight, Economic Times