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

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Tenure matters

Posted by Muthu on February 23, 2016

We always repeat that the key factor which determines your success is how long you stay invested.

I was going through an article sharing latest AMFI data.

Around 40% of investors hold equity funds for only a year or less.

Only 37% of investors hold equity funds for more than 2 years. This implies that for 63% of investors the holding period is 2 years or less.

No wonder most investors don’t make money out of equity funds and have bitter experience about stock markets.

I wish AMFI gives breakup for those who stay invested for 5+ years and 10+ years.

According to a data shared by HDFC mutual fund, hardly 2% of the investors stay beyond 10 years.

These are the people who would enjoy the benefit of compounding and long term investing.

Even in a bear market like this, last 10 year SIP returns of funds are in double digits.

The CRISL AMFI Equity fund index has never given a negative return for any 5 year period on a daily rolling basis since inception (19 years ago). So an investor has to stay for at least 5 years not to have a negative experience in equity.

In our opinion, the biggest value addition we provide is making you stay invested for 10 years or more. We ensure that you earn the returns which are provided by equity funds for a long term investor. Most of the investors do not reap this long term returns as they invest after few good quarters and redeem after few bad quarters.

We don’t let you time the market and ensure that you follow disciplined investing across all market conditions.

We believe that next 10 years would be much better than the previous decade for India. This government and RBI are doing many right things and we would start seeing the results in a year or two. Earnings growth would also pick up during this period.

All you need to do is to ignore volatility, have patience and continue your disciplined investing.

Avoid looking at your portfolio during these tough times. It would be of great emotional help.

Remember you are amongst the precious minority who would be creating good wealth through equity investing.

5 Responses to “Tenure matters”

  1. Ayyappan J said

    Thanks. Very nice article. Can you please advice in the following situation? – Assume one person is investing in a X Fund (Assume HDFC Equity) for around 6 years, but later realised that the performance of the fund is consistently below the average. Hence, he moved to a new fund (Y Fund) (above average fund – not in best funds) switching complete money from X Fund House to the Y fund house (all the money in the market only). In this case, he would have realized more return than he would have got from sticking to X fund? Am I right or Am i missing something?

  2. wangkam said

    is there any worthwhile calculator to do rolling returns of various MF schemes?
    found one in freefincal.com. yet not much useful.

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