Your mutual fund is meeting its goal. Should you still switch? Radhika Gupta explains

The problem, she said, starts when investors begin comparing their fund’s performance with the latest market winner.

“Most investors start with an absolute goal,” Gupta wrote. “I need 10% returns. I need to retire comfortably. I need my money to beat inflation and grow.”

According to Gupta, if the fund delivers the expected returns and the investor’s financial goal remains on track, there may be little reason to make a change simply because another fund has performed better.

“But a newer, hotter fund appears. It made more. Suddenly, what was good enough isn’t good enough anymore. Absolute becomes relative,” she said.

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Why switching funds can become a problem

Gupta said this change in mindset can set off a cycle of performance chasing. Investors move money towards funds that have recently delivered strong returns, while fund managers themselves can face pressure to keep up with peers.

“As the chase intensifies,” portfolios can become more aggressive and investors may end up taking risks they had not originally intended to take, her comments suggest.

The irony, Gupta noted, is that the investor’s original goal may not have changed at all.

This does not mean performance should be ignored. Gupta stressed that weak performance is a valid reason for investors to examine whether their fund continues to meet its objective. However, recent outperformance by another fund, by itself, may not be a sufficient reason to switch.

“Too little performance is a problem. But too much performance should also make you ask questions,” she wrote.

Her warning is rooted in a broader principle of investing: extraordinary returns often come with extraordinary risks, whether those risks are immediately visible or not.

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What should investors look at?

Gupta has previously said she evaluates mutual funds using their absolute and benchmark-relative rolling returns, including average, minimum and maximum returns, rather than relying only on headline one-year performance. She has also highlighted five-year rolling returns as a more meaningful measure for evaluating equity funds over longer periods.

Her latest message is ultimately about keeping investment decisions tied to financial objectives rather than constantly comparing portfolios with recent winners.

“The best investing is not about finding the fund that wins every year,” Gupta wrote. Instead, investors should choose an approach that can take them towards their financial goals and have the discipline to remain invested.

She summed up the behavioural risk in a pointed warning: “The biggest wealth destroyer is often not poor performance. It’s the constant search for better performance.”