This is the most common grouse I hear from most equity investors.
Sure the markets have been very "challenging" in last 5 years. Sure, if you look at the Nifty or Sensex, you see no returns. In fact there is depreciation from the peak levels.
The reasons for markets under-performing are, of course, quite genuine...global financial crisis coupled with policy paralysis/bad policies in India. However, people are interested in 'returns' not 'excuses' (howsoever, genuine they may be).
And I wish to show that people are wrong. Things have not been as bad as they appear to be. In fact, I would say they have been quite good.
Let us suppose
a) you started your investment in equity funds on 10th Jan, 2008 when the markets were at peak (Nifty was at 6157)
b) you invested in 10 funds, which in 2008, were amongst the top-rated funds
c) as commonly advised you had a mix of large-cap, diversified, mid-cap and sector funds
d) as commonly advised you did SIPs in all these funds
e) as commonly advised you took a 5-year investment horizon
In 5 years (i.e. 60 months) you would have invested Rs.60,000 each in the 10 funds — total investment Rs.6 lakhs.
So what did you achieve after 5 years on Jan 1st, 2013?
The Nifty on Jan 1st, 2013 was 5950 i.e. a loss of 3.36%. But what about your portfolio?
Fund value and annualized returns as on Jan 1, 2013 were as under:
- Franklin India Prima Plus – Rs.85,379 (14.19%)
- Birla Mid-cap Fund – Rs.85,236 (14.12%)
- DSPML T.I.G.E.R. Fund – Rs.72,256 (7.43%)
- Reliance Growth Fund – Rs.82,619 (12.85%)
- Reliance Vision – Rs.74,622 (8.73%)
- SBI Magnum Contra Fund – Rs.75,500 (9.22%)
- Sundaram Select Focus – Rs.71,518 (7.01%)
- Sundaram Select Midcap – Rs.91,398 (16.99%)
- UTI Infrastructure Fund – Rs.61,707 (1.11%)
- Reliance Pharma Fund – Rs.1,17,893 (27.6%)
Total portfolio value - Rs.8.18 lakhs. Effective Returns - 11.70% (tax-free). Not bad.
Ok. Let us also take a recent date Jun 25th, when the Nifty is down almost 9% at 5609.
Total portfolio value - Rs.7.29 lakhs. Effective Returns - 7.49% (tax-free). Definitely not bad.
And remember,
a) these returns are despite the GDP growth falling from 9%+ to less than 5%
b) these returns are despite making no changes in the portfolio. (Normally, some of these funds would have been replaced during periodic review as they could not maintain their performance)
Just imagine if things were even half good as they are today.
Just imagine how much money you would have made.
Sure the markets have been very "challenging" in last 5 years. Sure, if you look at the Nifty or Sensex, you see no returns. In fact there is depreciation from the peak levels.
The reasons for markets under-performing are, of course, quite genuine...global financial crisis coupled with policy paralysis/bad policies in India. However, people are interested in 'returns' not 'excuses' (howsoever, genuine they may be).
And I wish to show that people are wrong. Things have not been as bad as they appear to be. In fact, I would say they have been quite good.
Let us suppose
a) you started your investment in equity funds on 10th Jan, 2008 when the markets were at peak (Nifty was at 6157)
b) you invested in 10 funds, which in 2008, were amongst the top-rated funds
c) as commonly advised you had a mix of large-cap, diversified, mid-cap and sector funds
d) as commonly advised you did SIPs in all these funds
e) as commonly advised you took a 5-year investment horizon
In 5 years (i.e. 60 months) you would have invested Rs.60,000 each in the 10 funds — total investment Rs.6 lakhs.
So what did you achieve after 5 years on Jan 1st, 2013?
The Nifty on Jan 1st, 2013 was 5950 i.e. a loss of 3.36%. But what about your portfolio?
Fund value and annualized returns as on Jan 1, 2013 were as under:
- Franklin India Prima Plus – Rs.85,379 (14.19%)
- Birla Mid-cap Fund – Rs.85,236 (14.12%)
- DSPML T.I.G.E.R. Fund – Rs.72,256 (7.43%)
- Reliance Growth Fund – Rs.82,619 (12.85%)
- Reliance Vision – Rs.74,622 (8.73%)
- SBI Magnum Contra Fund – Rs.75,500 (9.22%)
- Sundaram Select Focus – Rs.71,518 (7.01%)
- Sundaram Select Midcap – Rs.91,398 (16.99%)
- UTI Infrastructure Fund – Rs.61,707 (1.11%)
- Reliance Pharma Fund – Rs.1,17,893 (27.6%)
Total portfolio value - Rs.8.18 lakhs. Effective Returns - 11.70% (tax-free). Not bad.
Ok. Let us also take a recent date Jun 25th, when the Nifty is down almost 9% at 5609.
Total portfolio value - Rs.7.29 lakhs. Effective Returns - 7.49% (tax-free). Definitely not bad.
And remember,
a) these returns are despite the GDP growth falling from 9%+ to less than 5%
b) these returns are despite making no changes in the portfolio. (Normally, some of these funds would have been replaced during periodic review as they could not maintain their performance)
Just imagine if things were even half good as they are today.
Just imagine how much money you would have made.
