Mutual funds no short-term investment option

would have flown into mutual funds. Equity inflows may well touch `70,000 crore, or even higher, for the year. That’s great news. Or, maybe it isn’t.

It’s certainly great news for the mutual fund industry. More assets means more revenue and profits, and the expenses that fund companies can effectively charge on equity assets are now significantly higher than what they were until a few years ago.

However, the renewed interest in fund investing at this particular juncture isn’t great news for those investing in them. It’s pretty clear that investors are pumping cash into equity mutual funds after the equity markets have shot up.

Ideally, one should have steadily invested in them over the past few years, when the markets were drifting. Investors who did that have reaped rich rewards over the last year.

In sharp contrast, a high proportion of equity fund investors have set themselves up for relatively poor returns.

The problem is not just that they have made a late entry, but that a large chunk of investments may be from those who consider equity mutual funds as some sort of short-term trading option.

This hot money has come in when the markets have gone up a lot, but it will also go out whenever the market has a hiccup. In effect, these traders would have bought high and sold low, which is the exact opposite of how handsome returns can be generated.

While it’s good that a lot of people are investing in mutual funds, one hopes a good proportion of this is not to try for some short-term tactical investing that will eventually backfire. CONTINUED FROM PAGE 15 The Indian basket of crude oil is also ruling at above $55 after crashing to below $45 a barrel last month.

Citing a major shake-up in the oil markets, the International Energy Agency (IEA) has also predicted a recovery in global oil prices. Stating this in its five-year forecast, the IEA said global oil prices will rise to $73 per barrel by 2020. Even after Sunday’s increase, petrol price is at its lowest since September 2010, and diesel since March 2013. Petrol price had been cut 10 times since last August by a total `17.11, and diesel six times since October by `12.96 cumulatively.