I have a friend of mine who has now decided not to put any money in any mutual fund schemes as part of his tax planning exercise. He has also decided to fire his financial advisor because his financial advisor had recommended the concerned investments over the last four years and now my friends finances are now in a big mess. My friend feels that his financial advisor is not worth the fee that his financial advisor is not worth the fee he pays him. My friend is angry about losing more than half of his money in the past year.
In my opinion, my friend should try to figure the reason for the poor performance and to compare the schemes with his peers. It is a known fact that the market has dropped around 30% from its peak levels and nearly all stock investments have suffered to some extent. I also agree that the mutual fund schemes have been faring badly for at least two quarters. In fact, some are lurking in negative territory. But all this above factors do not justify my friends decision to dump tax saving or any other equity schemes from his investment portfolio. If my friend does it, I would consider it as a big mistake.
I would like to conclude this article by stating that we are all aware of the fact that stocks tend to be extremely volatile in the short-to medium term. But they have the potential to beat all other forms of investment in the long run ( about three years). Give it five years or more and chances are you’ll earn spectacular returns.
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