Invest Smart: Why you need long-term investments in Mutual Funds

Latest data by capital markets regulator SEBI shows that in the last financial year, half of investments made in mutual funds got redeemed within a year. Not just that, 73% of mutual fund units were redeemed with just 2 years of investments. And only 3% of the investments continued for more than 5 years.

Now, this is quite concerning. Because investing for the long term, is the bedrock of wealth creation. Its only after the initial few years that you actually see the benefits of the power of compounding. For equity mutual funds experts say a minimum of 5 years is a must.

Chasing past returns can often lead to disappointment and investors exiting their equity mutual funds too soon. Instead financial planning and investing based on your financial goals and risk appetite will ensure you invest in the right instruments and remain invested for the long term, says Pankaj Mathpal, CEO, Optima Money Managers.

It is also important to ensure that your investment beat inflation in the long term. For this, long-term equity investments is a must, says Mathpal.