Wise Wealth Advisors

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

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This one is must

Posted by Muthu on December 17, 2017

Though we’ve not received any formal communication, we understand through articles in media, as quoted by AMFI (Association of mutual funds in India), the deadline for linking Aadhar with your mutual fund folios has been extended till March 31’st 2018. We would continue to co-ordinate with each one of you and complete the process well ahead of above timeline.

The average mutual fund holding period in India is around 18 months.

A book, Capital Returns mentions that the average holding period of stocks in Asia is 10 months. So for India too, it should be around this number.

I was reading this article today.

As of 2010, the average holding period of US investors has fallen to 6 months from 8 years in 1960.

Warren Buffett once said “What makes sense in business also makes sense in stocks: An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.”

No owner holds his company for 10 months. The holding period is measured in decades.

The idea of owning stocks or equity funds is to grow along with businesses. How much growth would happen in 10 months, the average holding period for most of the investors?

In our family portfolio, be it stocks or equity funds, we buy with an intention to hold not less than 10 years. Not that we would not make course correction, but as a principle it would be less frequent. If we buy right, churn can be kept at the minimum.

All of you have good experience in investment made through us in mutual funds. Why it is so? Because based on our advice, you’ve been holding your investments for many years. Longer the time horizon better would be the results.

You’re a rare breed because very few hold on to their investments for 10 years or more. I’ve earlier shared with you many examples how churning leads to poor returns. Chasing performance in a good fund, investing after few good quarters and redeeming after few bad quarters, would give you subpar returns. But staying invested without hopping in and out even in an average fund, would give you excellent returns.

It is time that matters in investing. This is least understood and followed.

Coming back to the above mentioned article, Warren Buffett’s average holding period for many of his stocks is 20 years against the average of 6 months for the investor community.

He buys right and sits tight. We’ve also seen about a fund manager in UK, Nick Train whose average holding period is 18 years. Once you invest in good funds or stocks, what is required is staying invested for long time.

This one is must. This trait alone would ensure you build a fortune over time.

One Response to “This one is must”

  1. […] This one is a must (Muthu) […]

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