Introduction: In the current market landscape, the performance of mutual funds, particularly small cap funds, has been a topic of discussion. One such fund, Reliance Small Cap Mutual Fund, has seen fluctuations in its performance over the past two years. This article aims to provide insights into whether it is advisable to continue investing in this fund.
Understanding Market Performance and Duration
Investing in mutual funds, especially those focused on smaller and mid-cap equities, requires a higher degree of risk tolerance and a longer investment horizon. The recent underperformance of small cap and mid-cap mutual funds since January 2018 is a notable trend. During this period, numerous small cap mutual funds, including the Reliance Small Cap Mutual Fund, have experienced a significant drop in Net Asset Value (NAV).
Why the Current Time is Ideal to Invest
Despite the short-term downsides, the current time is considered a favorable period to invest in small cap funds. This is because small and mid-cap equities have been hammered in the market, leading to a dramatic decline in their NAVs. By investing through Systematic Investment Plans (SIPs), investors can take advantage of the lower price points to acquire more units. This strategy not only averages out the cost per unit but also potentially enhances long-term returns.
Reliance Small Cap Mutual Fund: A Deep Dive
The Reliance Small Cap Mutual Fund, rated 4 stars by Credit Rating Information Services of India Limited (Crisil), has demonstrated a robust performance. Over the past five years, it has delivered an annualized return of 13.5%, which is significantly higher than the category average of 9%. This fund's performance highlights its ability to generate superior returns for investors over the long term.
Research and Decision Making
To make an informed decision about continuing to invest in Reliance Small Cap Mutual Fund, it is crucial for investors to conduct their own research. Several online resources and professional advice from certified investment planners can provide valuable insights. These resources can help investors understand the current market dynamics, the fund's performance history, and potential future trends.
Conclusion: The Importance of Long-Term Perspective
While short-term market fluctuations are an inherent part of investing, a long-term perspective is paramount. Investments in mutual funds, particularly those focused on small caps, should be made with a timeframe of at least 5 years, if not more. Investors who plan to hold their investments for 8 to 10 years can likely ignore short-term market fluctuations and focus on the long-term potential for return. However, for those considering shorter investment horizons, mutual funds may not be the most suitable option.