🧭 Introduction: The Allure and Illusion of High Returns
“Which mutual fund gives the highest return?”
If you’re even slightly active in financial circles on social media, WhatsApp groups, or investment forums, you’ve heard this question repeatedly. For most beginners, the assumption is simple: the fund or stock that gives the highest return must be the best. However, this mindset, although common, is often the root cause of poor investment outcomes.
High returns are appealing. They spark curiosity, greed, and a sense of urgency. However, investing isn’t a race, and it’s not about reaching the finish line the fastest. It’s about reaching the right destination with the least possible risk.
Just like a doctor prescribes medicine tailored to your health condition, not the most potent drug, your investments should also be tailored to your financial goals, not what’s trending.
Let’s explore why appropriate returns, not high returns, are the cornerstone of smart, sustainable investing.
💸 What Are High Returns?
“High returns” refers to an investment that yields significantly higher-than-average returns, often within a short period. For instance:
- A small-cap fund that delivered 35% CAGR over 3 years.
- A sectoral fund that doubled in a year.
- A crypto coin that skyrocketed 5x in a few months.
Such stories are familiar and often amplified by social media. However, what they usually overlook is the underlying volatility, risks, and losses incurred by many who entered late.
Characteristics of High-Return Investments:
- High volatility
- Short-term cyclical behaviour
- Requires perfect entry/exit timing
- Suitable only for investors with high risk tolerance
- Requires a deep understanding of markets
They’re like Formula 1 cars; not everyone can handle them.
🎯 What Are Appropriate Returns?
Appropriate returns refer to the realistic, risk-adjusted returns that align with your goals, time horizon, and risk profile.
For example:
- A long-term equity SIP returning 11–13% CAGR
- Debt funds delivering 6–7% for 3-year goals
- Balanced funds generating 8–10% over a medium-term horizon
These returns may not excite you at a party, but they help you reach your goals without losing sleep.
Features of Appropriate Returns:
- Predictable and goal-aligned
- Backed by asset allocation and planning
- Lower volatility
- Fits into life plans (e.g., kids’ education, home buying, retirement)
- Easier to stick to over 10–20 years
⚖️ High Returns vs Appropriate Returns: What’s the Real Trade-off?
Let’s break this down side-by-side.
| Parameter | High Returns | Appropriate Returns |
| Target Audience | Aggressive, risk-tolerant investors | Long-term, goal-focused investors |
| Volatility | High | Low to moderate |
| Consistency | Unreliable | Sustainable over time |
| Emotional Pressure | Very high | Manageable |
| Risk | Often underestimated | Properly evaluated |
| Monitoring Required | Frequent tracking & timing needed | Minimal monitoring if well allocated |
| Outcome | Can outperform OR underperform drastically | Delivers steady goal-linked wealth |
🧠 Why Investors Fall for the “High Return” Trap
Investor psychology plays a massive role in chasing high returns. The common behavioural biases include:
1. Greed
“If my friend doubled his money in 18 months, why shouldn’t I?”
2. FOMO (Fear of Missing Out)
Investors often enter overheated funds because “everyone is making money,” even when fundamentals don’t support it.
3. Recency Bias
We give too much importance to recent performance. If a fund returned 30% last year, we assume it will repeat the performance.
4. Overconfidence
Past success can lead people to overestimate their understanding of markets.
5. Lack of Financial Literacy
Without clarity on risk-adjusted returns, most people think “higher is better.”
🏦 Goal-Based Investing: Where Appropriate Returns Shine
Imagine three investors:
- Riya, planning for her son’s education in 10 years
- Karan, saving for retirement in 25 years.
- Nidhi, building a 6-month emergency fund
Each of them needs different investment strategies and returns:
- Riya doesn’t need a 25% CAGR. She needs to achieve a consistent 10–12% growth.
- Karan should aim for 12–13% using equity SIPs.
- Nidhi should park money in liquid funds or FDs with 5–6%, not equity.
In all cases, appropriate returns help meet goals without unnecessary risk.
💡 Real-Life Case Study: High Return vs Appropriate Return
Amit, an aggressive 28-year-old investor, put ₹5 lakh into a trending small-cap fund in 2021. The fund had returned more than 30% in the previous year. But by mid-2022, it dropped nearly 25%. Panicked, Amit exited at a loss.
Meanwhile, Priya, a conservative investor, started a ₹10,000/month SIP in a balanced advantage fund. In three years, she earned an average 10% CAGR, a steady and predictable result that aligned with her five-year home down payment goal.
Who fared better?
Priya, because her returns, though lower, were appropriate and stress-free.
🔍 How to Identify What Return You Need
Ask yourself:
- What is the goal?
- What is the timeline?
- Can I handle losses on the way?
- Do I have other income or dependents?
Quick Estimation Table:
| Goal | Time Frame | Ideal Return (CAGR) | Suggested Asset Class |
| Emergency Fund | < 1 year | 5–6% | Liquid, Arbitrage Funds |
| Vacation/Short Goal | 1–3 years | 6–7% | Short Duration Debt Funds |
| Car/Marriage Fund | 3–5 years | 7–9% | Hybrid, Balanced Advantage Funds |
| Children’s Education | 10–15 years | 10–12% | Equity Mutual Funds + Hybrid |
| Retirement Planning | 20+ years | 11–13% | Equity SIPs, NPS, Index Funds |
📉 The Problem with “Performance Chasing”
Every year, new top-performer lists emerge. But most funds that top the chart one year:
- Underperform the next year
- Attract a large number of investors at the peak.
- Deliver poor outcomes for late entrants.
Morningstar studies show:
“More investors lose money by chasing past performance than by holding average-performing funds over the long term.”
🛡️ Advantages of Focusing on Appropriate Returns
- Aligned with Financial Goals
You invest not for the thrill, but for a purpose, such as education, retirement, a home, and so on. - Better Risk Control
You avoid unnecessary drawdowns and panic. - Higher SIP Continuity
Fewer ups and downs = more chances you’ll stick to your plan. - Less Emotional Decision-Making
You don’t jump in or out based on market noise. - Compounding Works Best
Staying invested in the right vehicle for the right time frame delivers powerful long-term wealth.
💬 Expert Insights
“Volatility is the price you pay for high returns. But appropriate returns deliver peace of mind with purpose.”
— Saurabh Mukherjea, Fund Manager
“You don’t need the highest return. You need the return that gets you where you need to go.”
— Nick Maggiulli, Data Scientist & Author
🧘 10 Ways to Build a Return-Appropriate Portfolio
- Define your financial goals clearly
- Know your time horizon.
- Assess your risk appetite honestly.
- Avoid investing solely based on a 1-year performance.
- Choose mutual fund categories accordingly.
- Don’t invest in sectoral or thematic funds without understanding the cycles.
- Use SIPs for consistency.
- Use STPs to move lump sum money gradually.
- Rebalance the portfolio once a year.
- Work with a financial advisor who understands YOU, not just the market.
🚨 Warning: When Appropriate Returns Go Wrong
Even appropriate returns fail if:
- You withdraw early
- You don’t review the portfolio periodically.
- You fall prey to FOMO midway and switch to riskier assets.
Appropriate investing is a mindset. It rewards the patient, disciplined, and informed investor.
📝 Final Words: Choose Appropriateness Over Hype
In investing, “best” is not a universal term. The best return for you depends on your life, goals, and responsibilities.
High returns may seem glamorous, but they often come with stress, sleepless nights, and regret. Appropriate returns are what wealthy people seek, not the highest, but the most sustainable.
Invest not to impress others, but to secure your future.
Appropriate investing is not dull, it’s brilliant. It means you’ve understood the real purpose of money: freedom, not fear.
🧭 Let VSJ FinMart Help You Plan Smarter
Want help calculating the return you need?
Need a mutual fund plan built around your life, not just charts?
👉 Contact VSJ FinMart today for a goal-aligned, risk-aware, peace-driven investment journey.
📘 Further Reading: Chasing Returns vs. Finding the Right Fit
🔹 1. High Returns or Appropriate Returns? – Morningstar India
Explains why aiming for appropriate returns, balanced with risk and your personal goals, is smarter than chasing the highest possible gains.
🔹 2. Investors Must Moderate Return Expectations—Stick to Asset Allocation – ET Wealth
Market expert Nilesh Shah emphasises that, given current economic uncertainties, disciplined allocation outperforms the pursuit of outsized returns.
🔹 3. Determining Risk and the Risk Pyramid – Investopedia
Illustrates how investment risk levels relate to expected returns and why understanding your position on the risk pyramid protects you from chasing unrealistic gains.
🔹 4. Stock Market Declines and the Art of Asset Allocation – Economic Times
Discusses how disciplined selling at highs and reallocating into rebounds can stabilise portfolios, maintaining appropriate returns.
🔹 5. Investing Strategy: Can Quality Help You Minimize Risk and Maximize Returns? – Economic Times
Highlights how choosing high-quality, resilient companies can lead to steadier, more appropriate returns, even in volatile markets.
Disclaimer: The information provided in this blog is for Educational and informational purposes only and should not be considered financial, investment, or tax advice. While every effort has been made to ensure accuracy, readers must consult a qualified financial advisor before making investment decisions. VSJ FinMart is an AMFI-registered mutual fund distributor (MFD) that does not provide investment advisory services. Mutual fund investments are subject to market risks; please read all scheme-related documents carefully before investing.