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

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Fact, not fiction

Posted by Muthu on November 14, 2015

Rs.1 lakh invested in Franklin India Bluechip Fund in December 1993 is worth Rs.83.17 lakhs in September 2015. Money multiplied by 87 times in 21+ years. This works out an annualised return of 22.43%.

Rs.1 lakh invested in HDFC Tax Saver in March 1996 is worth Rs.94.32 lakhs in September 2015. Money multiplied by 94 times in 19+ years. This works out an annualised return of 26.24%.

These are facts, not fiction.

In India, diversified equity funds (non sectoral, non thematic) have done very well over last 2 decades.

CRISIL AMFI Equity Fund Performance index has provided an annualised return of 22.74% over last 18+ years.

As pointed out in our previous posts, only around 2% of investors stay beyond 10 years in an equity fund. These are the people who enjoy the above kind of returns.

We would be completing 10 years in our profession next year. We have many investors who have been staying invested for 9 years, 8 years etc. In next couple of years, many of our investors would have held to their portfolio for 10 years or more.

I’m happy that you would all see power of compounding in your portfolio in next few years. Many are seeing even now and are happy with their decision.

Whatever we do; all our activities, interactions, meetings, tweets, blogs etc. are to reinforce and ensure that you stay the course. My goal is each one of you should be able to see for yourself, in your portfolios, the benefits of not churning the portfolio, staying the course without interruption, patience, power of compounding and long term investing.

Though doing nothing and sitting tight may be very boring and difficult, the results of the same would be extremely rewarding.

Think of equity as a multi decades and multi generational investment. You would get returns better than any other asset class. Not only that you would create huge wealth and be financially independent.

If you are not investing long term money into equity, it is a wasted opportunity.

As a country, we have a very long way to go and grow to be economically powerful.

Participate and benefit from the journey by investing in equity funds.

Note: The above data is from fund fact sheets duly verified with Valueresearch as well.

18 Responses to “Fact, not fiction”

  1. Girish Sidana said

    I understand your theory of long term equity investments. In fact I am myself a strong believer of the same. However, I would like you to do a detailed post on what happened in Japan. Nikkei has yielded very poor CAGR since 1990. Now that’s a very long time, more than 2 decades! Why a similar situation can’t happen in India?

    • Muthu said

      As long as the economy and corporate earnings continue to grow, stock markets would also go up. I’m confident that our economy would grow well for decades to come. How much Japan has grown in last 2 decades?

      • JK said

        Is there any study or info on who Japanese people manage their savings / retirement in such a scenario? Is their pension funded by govt? Given the high cost of Living in Japan, how is retirement funded in Japan?

    • jeanLucPicard said

      Even with Nikkei, if one did SIP, they would have got positive results. With inflation near zero in Japan, one could have beaten inflation. Even more with dividends reinvested. In todays world economy, it is not good to limit your equity exposure to one country. Diversify across countries to reduce risks.

      • Girish Sidana said

        Nikkei was around 40,000 in 1990 and was at 10,000 in 2014 (The graph at Wikipedia did not have current data). It has been on a continuous downward slope in this period. How can a SIP yield positive results in this situation? Can you please explain?

  2. Balaji Prabhakaran said

    I believe HDFC Tax Saver started with a NAV of 10 in March 1996 and is now at about 370 odd. That means 1 lakh invested would be now only 37 lakh. Am I missing something? Can you please explain how its 94.32 lakhs now?

    • Muthu said

      The data I provided is from HDFC MF fund fact sheet. Possibly they might have had a dividend plan alone initially (with reinvestment option) and would have come up with a growth option later. You may cross check this with Valueresearch.

      • Balaji Prabhakaran said

        I think you have the moral responsibility to check the facts before endorsing the same. Or at least to check and confirm if a question is raised. You have been doing a great job with your blog. But such a response puts a question mark on your credibility.

      • Girish Sidana said

        I second you Balaji on your comment.

  3. Dear muthu
    I would like to invest around 10000/month as sip.would u suggest some best funds.I will invest for more than 10 years & would increase sip amount 5% every year.

  4. nev said

    Good spot Balaji Prabhakaran.. Sometimes these funds have interesting ways of coming up with ‘returns’

  5. subra1221 said

    I am a big believer of education. But please tell me how Dhirubhai Ambani, and Sachin Tendulkar became so great without education? should i ask my son to stop studying in class 7th or 9th? Please advice.

    • Girish Sidana said

      They became big because of their talent, grit, determination and hard work not just because they did not study.

    • jeanLucPicard said

      Depends on your definition of education. Ambani is highly educated in business and Sachin is highly educated in batting. Bill gates is highly educated in software. Fish may not be educated in climbing trees but fish is highly educated in swimming. If one can match the education to natural abilities. one can do very well.

  6. vinod said

    Nifty Fifty was born with a base of 1000 on November 3,1995,a year after NSE’s Equity Segment was born

    Today after 20 years it’s 8000 computing to a CAGR of just 11%

  7. Ashis Sen said

    Why to start with Rs. 1 lakh? In the 90’s, 1 lakh was a huge amount of money. Rather I would say 10,000 was decent. I always see Mutual Fund houses and the CFAs set the initial amount in such a way that the end amount looks big in today’s value. You always promote SIP. Why are you showcasing 1 lakh? I have 10 lakh rupee with me. What should I do? You will tell me to do STP and SIP. And later on 10 – 20 years later somebody will erect a data to prove how lump sum would have made more money. Please be neutral and check the data before posting. Reliance Growth Fund has grown to 800 level from NAV of 10. It’s a fact. Not HDFC Tax Saver.

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