You invest to earn returns. However, returns are a function of many things. Different banks don’t offer the same rate for fixed deposits of similar tenure. Come to market-linked investments like mutual funds, and the differences get magnified. The past 1-year returns for funds in the large-cap equity category ranged from 12% to 36%. If you were invested in a fund that delivered the worst, your portfolio return would look relatively poor. Thus, should you always try to pick the top performer? Even in case of fixed deposits, it’s rare that investors pick the one that offers the highest return or even compare the returns. Rather, it is more about convenience of having investment products with the bank one has a savings account in. In case of market-linked investments, rankings based only on returns can change at short intervals, and moving in and out of funds based only on performance can be costly and counterproductive.
