Saturday, February 5, 2011

Chapter 8 - What is Short term , Long Term and Medium Term ?

Investment  Guru of MFs give following duration for short , medium and long terms.
Short Term  : 1-2 Years
Medium Term 3-4 Years
Long term : 5 years and more

But in my experience there is nothing like short term in mutual funds. If you need money within 1-2 years then better go for FDs , Gold or Silver or bonds.

If market tank for some reason then it takes at least 1 to 2 years to come back to previous level and it is not guaranteed that your Mutual fund NAV will be back to previous NAV in 2 Years despite giving 100% return in this period.

After  2007 - 2010 recession period many mutual funds are still below there previous hight.

Medium term 3-4 years time duration is enough to keep your money protected and give some return if some kind of recession hits the markets.

Best time horizon is PPF's  or Tax saving FDs time period that is 5 years .
Unless until you invested in Junk Mutual fund , you should not worry for returns for 5 years duration
With best Mutual funds you can expect good returns in 5 years horizon .
Point to be noted here is that redeem your money if  markets  hit life time high before 5 years . Otherwise greed of more return with eat out your profit when you need money .

best time period is 10 years >   for wealth creation , house , car buying ,children education marriage etc .
Happy investing ..

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