Every journey begins with a step, and in investing, your first step matters more than you might think. Many new investors devote tremendous energy to selecting the “best” mutual fund—one with the highest past returns or the most impressive rankings. But paradoxically, the very fund that looks optimal on paper may be the least reliable companion for your long-term investing journey.
Allure of Perfection
It’s tempting to chase after a fund with stellar past performance. When presented with options, our instinct pushes us towards those with eye-catching returns, hoping to replicate past success. But this mindset overlooks a fundamental truth: what matters most for new investors is not the absolute performance of a fund but the ability to stay invested through thick and thin. In many cases, what appears “suboptimal” at first glance can actually set the foundation for long-term success.
Emotional Strength Over Stellar Records
Investing is as much psychological as it is analytical. A fund that allows investors to endure volatility, maintain composure, and continue disciplined investing is often more valuable than one that swings wildly in either direction. A “best-looking” fund might cause anguish during market downturns, prompting hasty exits and lost opportunities. A modest, steadier fund may build confidence and emotional resilience—traits far more critical to long-term success than chasing top-tier returns.
In truth, instead of asking “Which fund is best?” beginners should ask, “Which fund can help me become a disciplined investor?”
Perils of Optimisation Obsession
We live in an era obsessed with optimising every choice. We assume that the “best fund” must be chosen at the outset, and we spend hours comparing returns, rankings, sector exposures, and minute metrics. But such perfectionism often misfires—especially at the start.
A rookie investor might invest in a high-volatility small-cap fund after seeing stellar recent returns. But when markets wobble, the emotional stress could lead them to abandon the strategy prematurely. A more moderate fund, by contrast, might offer smoother rides that allow the investor to remain committed through market cycles.
What the ‘Ideal’ Starter Fund Should Do
So what characteristics should a starter fund have? It should:
Be manageable in volatility so it doesn’t shake your confidence every time markets fluctuate.
Encourage consistency, rather than demanding perfect timing or attention to every market movement.
Allow you to learn and adapt, giving you space to build habits like monthly investing, reviewing holdings, and staying invested through corrections.
Help you remain invested, even when markets turn volatile, rather than tempting you to exit prematurely.
Such a fund may not always top every leaderboard, but its value lies in cultivating a steady investing mindset.
‘Perfectly Imperfect’ Start
The real secret in mutual fund investing is embracing imperfection. The perfect start is, ironically, imperfect—one that prioritises your staying power over chasing returns. When new investors feel in control, understand their choices, and grow in confidence, they’re more likely to increase capital, remain invested, and gradually broaden their portfolio.
Once you’ve built that discipline and confidence, shifting into more specialised, higher-risk funds becomes easier and more sustainable.
Don’t Let Fear or Hype Drive Your Choice
Many times, investing decisions by newcomers are guided by fear or hype. They jump into a fund because it’s trending, or they freeze due to fear of making the wrong move. Neither impulse serves long-term investors. The better path is to anchor decisions in your own capacity to stay invested and your long-term goals, not in the temptation to ride every wave.
Final Thoughts
Your first fund doesn’t need to be your best-performing one—it just needs to be the one you can stay with. The goal is not to catch every uptick or time every dip; it is to remain invested, learn steadily, and let compounding do its work over decades.
In investing, the most successful strategy is rarely the most dramatic or glamorous. It’s the simple one: start with what you can stay consistent with, nurture discipline, and evolve over time. Let your first fund be your training ground—not your performance benchmark.
(The writer, as Founder and Chief Financial Coach of PlantRich & Vama PlantRich, has coached 5000 plus corporate professionals in rewriting their money story)
