Is a two-year slump a reason to sell your mutual fund? How to assess underperformance
New Delhi, Oct. 21 -- I bought a mutual fund because it was one of the top performers when I invested. It has since underperformed for two years. How do I distinguish between a temporary period of underperformance and a fund that genuinely no longer belongs in my portfolio?
Choosing a mutual fund can be overwhelming, and investing in a top performer may seem like a natural starting point. However, strong past returns do not guarantee future performance.
Our analysis of mutual fund performance over 13 years found that, on average, only 36% of the best-performing funds in one year remained among the top performers the following year. It is normal for funds to lose their rankings, so underperformance alone is not a reason to panic or exit....
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