HOW TO CHOOSE PERFORMING SCHEME

When we choose to invest in a Mutual fund scheme implies that we are availing MF’s professional expertise for payment of some fees. We must know that all the Mutual funds charge fund management fees to the scheme. So when we pay a professional fee, we must expect professional returns as well i.e returns in excess of the market’s return for the similar period.

This means that if BSE sensex rise 20% in a particular period, NAV of MF scheme where BSE sensex is the benchmark should rise more than 20% and similarly if Sensex falls by 20%, the scheme should fall less than the sensex. Such schemes only are called performing schemes. Delivery of market beating returns reflects a fund manager’s caliber. Longer the tenure of market beating returns, higher the probability of getting the same in future.

Amount of Savings	Annual Return of 11%	Annual Return of 14%
Rs. 3000/- (Rs. Three thousand only) per month	Rs. 84,90,000/- (Eighty four lakhs ninety thousand)	Rs. 1, 66, 00,000/- (Rs. One Crore sixty six lakhs)

The above table is to illustrate the impact of just 3% higher or lower returns in a longer period while the amount of savings remains same.

Therefore it is essential to choose performing MF scheme to build sustainable long term wealth.