Why is my mutual fund only earning 4%? it should give 12%

I have invested Rs 3,000 in the Kotak Tax Saver Fund for the past eight months. But my returns are only 4%. I see the fund doing well on various websites. What’s the catch here? Ideally, returns should be around 12%.–Akhilesh Kaul

Kotak Tax Saver Fund is an above average performer in the tax savings or ELSS category. Our assumption is that you have looked at returns for different time periods in the past. You should have checked SIP returns for the past eight months since you started investing. Equity mutual funds, including tax-saving mutual funds, do not guarantee any returns. Returns depend on the performance of stock markets and the investments made by the plan. We use 12% returns in our calculations, but this is only an assumption based on historical data. You can’t assume you’ll get 12% returns year after year.

It looks like you just started investing in mutual funds. You invest in a tax mutual fund that has a three-year holding period. This means that you will not be able to sell your investments for three years. This mandatory lock-up period will help you understand the risk and volatility associated with stocks. Stocks can be extremely volatile and risky in the short term. But it can offer you higher returns in the long run. Continue investing regardless of market conditions. If you find any of this confusing, you should seek the help of a mutual fund advisor.

Dolores W. Simon