Have you heard people saying, short term investment strategy works more than the long term
? Do you tend to believe that the world of investments is really uncertain and one should not stay invested too long? Have you sold your mutual funds in a haste and watched their prices soar high up again? Did you ponder if you had tossed in your towel too early?
To be frank there is no magical answer to these questions. It is true that the mutual fund schemes are linked to the market indices and that the markets tend to be uncertain and unless you are a regular trader doing your homework on your stocks you tend to lose more often than not.
But for most mutual fund unit holders the strategy is to think long. The key point to remember is that your money is not directly invested in stocks but being handled by an AMC and they are doing the investing for you. So they are taking the occasional shorting and shifting of positions to get you the optimum return on your money. So you need to be a little more patient with mutual funds than with stocks.
Now once you have decided to go long you must decide on the time frame for long term investors? Before deciding on the time frame it is better to understand the scheme first. It is in your interest that you READ THE OFFER DOCUMENT CAREFULLY! If you thoroughly understand the scheme in which you are going to be invested, then it would be easier for you to estimate the time frame along with the expected return on your units. Based on your comfort level with the scrip your time line may vary, but with mutual funds you need to stay committed to the scheme till you get the expected return.
Unlike with the specific stocks you dont need to panic if there are unfriendly global cues or if there is bad news leaking in from the news channels, know that with an AMC your money is adequately hedged both ways and even if you should lose (because you are investing in marketable securities and not in govt bonds!) you cant lose too much. So stay invested and think long...