For those aspiring to become crorepatis, the recent advertisement of Reliance Growth Fund, would have surely caught their attention.
Wait! Before I proceed further, it's important to state that this blog post is NOT an advertisement, NOR a recommendation to invest in a particular mutual fund.
Rather, it is a real life example of how you can become a crorepati... in a simple and transparent manner.
What is Reliance Growth Fund's achievement?
The fund was launched in Oct 1995. As usual, the NAV of the new fund was Rs.10.
A person investing Rs.1 lakh would have received 10,000 units (=1,00,000 / 10).
In May 2017, with barely a few months short of completing 22 years, Reliance Growth Fund became the first mutual scheme whose NAV (Net Asset Value) crossed the Rs.1,000 mark... a growth of 100 times.
Accordingly, the present investment value for the above investor, works out to a whooping Rs.1 crore (=10,000 units * Rs.1000/unit NAV).
This gives it an average annualized return of a stupendous 23%+ p.a. — and, more importantly, completely tax-free.
This brings us to a few key lessons we must learn from the above example.
Lesson No. 1: NAV is just a matter of age
Reliance Growth is not a unique or special fund. Its NAV is the first to cross the Rs.1000 mark because it is one of the oldest funds.
In the coming months and years, many more funds will cross this milestone.
Warning! You don’t have to invest in a Rs.10 fund to become a crorepati. Even the Rs.1000 NAV fund will make you a crorepati in the same time (assuming that both the funds always have an identical portfolio of stocks).
Must Read: NAV is 'Not Applicable Value' in Mutual Fund Investments
Lesson No. 2: Fund selection is important
Beware! Not all the old funds have crossed the Rs.1000 NAV mark. Some of them are way behind.
If you had, instead, invested in these funds, you would have probably reached a sum of around Rs.25-50 lakhs. Not bad, but not good enough!
Hence, choice of funds is quite critical. If you get into a below-par fund, your wealth creation could be seriously affected.
Lesson No. 3: There's no Get-Rich-Quick formula
It took almost 22 years to reach the Rs.1 crore mark with Rs.1 lakh as investment.
In other words, you won't make money overnight here. You have to spend time in the markets. [Read : Are you missing out on mind-boggling returns?]
Of course, as mentioned earlier Reliance Growth Fund is not a unique fund. So, some other funds may do the same job in less than 20 years. The difference, however, will at best be a few years here or there. But no fund will achieve Rs.1000 NAV in 1-2 years. Even 10-12 years is quite unlikely.
So, you have to invest and STAY INVESTED.
Lesson No. 4: Diversify. Review. Restructure.
It is practically impossible to predict which particular fund will specifically make you a crorepati.
However, it is definitely possible to know a set of funds that are most likely to take you close to your target. Therefore, a well-diversified portfolio is a must.
Also, given the 15-20 years of time frame, the funds selected may over-perform or under-perform. Or, funds based on new investment ideas, may enter the market. Hence, it is extremely important to Review and Restructure the portfolio at regular intervals.
In short, you can’t afford to invest and forget. While, your money should always remain invested in the markets, the specific funds in your portfolio may change from time to time.
Lesson No. 5: Think Growth Not Dividend
While the NAV of Reliance Growth Fund - Growth Option has crossed Rs.1000 mark, the NAV of Reliance Growth Fund - Dividend Option is around Rs.68 only.
Of course, this doesn't mean that your "returns" were affected. You would have received many many dividends during these 21-odd years.
However, on most occasions, you would have simply spent the dividends. Since you did not allow yourself to gain from the power of compounding, your "growth" definitely suffered.
Must Read: Growth or Dividend : Mutual fund option perfect for you?
Lesson No. 6: Don't listen to the noise around
These 21-odd years have not been easy and smooth sailing.
- We have seen policy paralysis
- We have seen many scams and crony capitalism
- We have seen job losses and salary freezes
- We have seen wars
- We have seen global financial crisis
- We have seen Asian financial crisis
- We have seen many coalition Governments
- We have seen floods
- We have seen droughts
- We have seen multiple terrorist attacks
- We have seen riots
- We have seen economic slowdown
- We have seen high inflation
- We have seen interest rates going through the roof
- We have seen rupee collapsing against the dollar
- We have seen power shortages and load-shedding
- And much more...
And yet, despite so many adverse developments, our economic progress has continued. This has, therefore, enabled the experienced and professional fund managers to suitably deploy our funds and make (really) good money for us.
Therefore, stay invested through all the rough and tough times. And you will be able to narrate your success story to your grand-children… besides, of course, leaving them crores of rupees as a legacy.
Before you go, don’t forget to re-discover the Shocking mistakes mutual fund investors often commit.
Wait! Before I proceed further, it's important to state that this blog post is NOT an advertisement, NOR a recommendation to invest in a particular mutual fund.
Rather, it is a real life example of how you can become a crorepati... in a simple and transparent manner.
What is Reliance Growth Fund's achievement?
The fund was launched in Oct 1995. As usual, the NAV of the new fund was Rs.10.
A person investing Rs.1 lakh would have received 10,000 units (=1,00,000 / 10).
In May 2017, with barely a few months short of completing 22 years, Reliance Growth Fund became the first mutual scheme whose NAV (Net Asset Value) crossed the Rs.1,000 mark... a growth of 100 times.
Accordingly, the present investment value for the above investor, works out to a whooping Rs.1 crore (=10,000 units * Rs.1000/unit NAV).
This gives it an average annualized return of a stupendous 23%+ p.a. — and, more importantly, completely tax-free.
This brings us to a few key lessons we must learn from the above example.
Lesson No. 1: NAV is just a matter of age
Reliance Growth is not a unique or special fund. Its NAV is the first to cross the Rs.1000 mark because it is one of the oldest funds.
In the coming months and years, many more funds will cross this milestone.
Warning! You don’t have to invest in a Rs.10 fund to become a crorepati. Even the Rs.1000 NAV fund will make you a crorepati in the same time (assuming that both the funds always have an identical portfolio of stocks).
Must Read: NAV is 'Not Applicable Value' in Mutual Fund Investments
Lesson No. 2: Fund selection is important
Beware! Not all the old funds have crossed the Rs.1000 NAV mark. Some of them are way behind.
If you had, instead, invested in these funds, you would have probably reached a sum of around Rs.25-50 lakhs. Not bad, but not good enough!
Hence, choice of funds is quite critical. If you get into a below-par fund, your wealth creation could be seriously affected.
Lesson No. 3: There's no Get-Rich-Quick formula
It took almost 22 years to reach the Rs.1 crore mark with Rs.1 lakh as investment.
In other words, you won't make money overnight here. You have to spend time in the markets. [Read : Are you missing out on mind-boggling returns?]
Of course, as mentioned earlier Reliance Growth Fund is not a unique fund. So, some other funds may do the same job in less than 20 years. The difference, however, will at best be a few years here or there. But no fund will achieve Rs.1000 NAV in 1-2 years. Even 10-12 years is quite unlikely.
So, you have to invest and STAY INVESTED.
Lesson No. 4: Diversify. Review. Restructure.
It is practically impossible to predict which particular fund will specifically make you a crorepati.
However, it is definitely possible to know a set of funds that are most likely to take you close to your target. Therefore, a well-diversified portfolio is a must.
Also, given the 15-20 years of time frame, the funds selected may over-perform or under-perform. Or, funds based on new investment ideas, may enter the market. Hence, it is extremely important to Review and Restructure the portfolio at regular intervals.
In short, you can’t afford to invest and forget. While, your money should always remain invested in the markets, the specific funds in your portfolio may change from time to time.
Lesson No. 5: Think Growth Not Dividend
While the NAV of Reliance Growth Fund - Growth Option has crossed Rs.1000 mark, the NAV of Reliance Growth Fund - Dividend Option is around Rs.68 only.
Of course, this doesn't mean that your "returns" were affected. You would have received many many dividends during these 21-odd years.
However, on most occasions, you would have simply spent the dividends. Since you did not allow yourself to gain from the power of compounding, your "growth" definitely suffered.
Must Read: Growth or Dividend : Mutual fund option perfect for you?
Lesson No. 6: Don't listen to the noise around
These 21-odd years have not been easy and smooth sailing.
- We have seen policy paralysis
- We have seen many scams and crony capitalism
- We have seen job losses and salary freezes
- We have seen wars
- We have seen global financial crisis
- We have seen Asian financial crisis
- We have seen many coalition Governments
- We have seen floods
- We have seen droughts
- We have seen multiple terrorist attacks
- We have seen riots
- We have seen economic slowdown
- We have seen high inflation
- We have seen interest rates going through the roof
- We have seen rupee collapsing against the dollar
- We have seen power shortages and load-shedding
- And much more...
And yet, despite so many adverse developments, our economic progress has continued. This has, therefore, enabled the experienced and professional fund managers to suitably deploy our funds and make (really) good money for us.
Therefore, stay invested through all the rough and tough times. And you will be able to narrate your success story to your grand-children… besides, of course, leaving them crores of rupees as a legacy.
Before you go, don’t forget to re-discover the Shocking mistakes mutual fund investors often commit.
