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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Longevity of investments maximises returns

Posted by Muthu on July 7, 2015

CAMS is the registrar for many mutual funds in the India. It’s CEO has written an article in Businessline on insights from analysis of mutual fund data.

Five growth plans of two diversified equity schemes, two balanced funds and one ELSS fund has been chosen for this study.

If you had held on to the original investment from the launch of the scheme (20 years+), your amount would have multiplied 57 times.

On an average, the investment held for 15-20 years multiplied 24 times, 10-15 years multiplied 15 times and 5-10 years multiplied five times. The longer the duration of the fund, the higher is the multiplication.

Diversified equity schemes in this study had Rs. 2.47 crore of original investment, which has multiplied to Rs. 113.4 crore (46 times the capital).

Balanced schemes in this study had Rs. 1.34 crore of original investment, which has multiplied to Rs. 69.9 crore (52 times the capital).

The ELSS scheme in this study had Rs. 0.29 crore of original investment which has multiplied to Rs. 11.1 crore (39 times the capital).

The data shows that a very small number of retail investors stayed invested for long and gained from the investment. Staying invested has helped these investors weather the equity market volatility and bull/bear runs.

The key observations by the author are:

  • Investments held for 15-20 years multiplied money 25 times
  • Only a small fraction of investors tend to hold on for very long durations
  • Shorter time horizon generally results in lower returns

So invest regularly. Invest for long term. Stay the course through ups and downs.

3 Responses to “Longevity of investments maximises returns”

  1. C J Gopinath said

    Only 8600 investors out of 1 billion ppl . Very pathetic.

  2. MRHDK2012 said

    This is good article. However, this study has selection bias. Seems only the successful schemes are chosen for study. I am an original investor of Morgan Stanley scheme which came in 1995.

    My investment has grown only 9 times in 20 years in this scheme.

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