Last 100 Month's Return- Share Market Verses Mutual Fund..! - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Sunday, May 15, 2016

Last 100 Month's Return- Share Market Verses Mutual Fund..!

IF you're not gung-ho on India now, when will you be?

by Mr. B. Padmanaban, CFPCM
Certified Financial Planner, 
Chennai 

Whenever one invest, few things are very important to consider before.
1. Investment should beat the inflation.

2. One should understand the power of compounding.

3. When you put everything in number and find out whether the instrument has really delivered return or not. Many will form opinion about hearsay, without getting into many investments.

4. Whatever the return we make, should be excluding the taxes.

5. Except Mutual funds and direct stocks many other investments are not tax efficient.

Do not invest for the sake of hearsay, do your homework and consult with any financial advisor about how each investments work and what is the risk versus return which is very important.

Today, everybody is so busy making money, and do not find time to deploy those money properly.

The biggest challenge today is the awareness about investments and investment products. Very few are really understand before they invest and created a huge wealth so far.

Here, I would like to give few data points which are very important to make decision about the investment.
B. Padmanaban,
CFPCM., Chennai

This also clearly indicates how fortunate everyone is today with huge opportunity in our hands.

1.    January, 8-  2008, SENSEX has closed all time high of 20873 points. We are exactly 100 months ((8 Years & 4 Months).) from now and on May 13, 2016 the Share market has closed 25489.

CAGR works out to 2.4% in the last 100 months. Do remember in those periods, savings account interest is 3.5% CAGR!

2.     January, 29-  2015, SENSEX has touched all time 29,681 (closing) from that it has fallen to 25489 on May 13,2016.
 In the last 15 months, market is down by 14.12% in absolute terms. 15% 
Discount!!!

 3.     In the last 23 Months (nearly 2 Years), SENSEX is flat.that is Nil Return.

Date
Sensex
11-Jun-14
25473
13-May-16
25489

Mutual fund performance

Look at the mutual fund performance during that time, the following returns are CAGR, whereas the SENSEX return is point to point. If you want to calculate the point to point returns for the below funds then you need to multiply by 2 because of 2 years and see how much return it has generated.
Do not anchor Sensex value when you invest, your investments are always beyond Sensex number.

Category
Best Fund
Worst Fund
Largecap
14.94%
3.35%
Multicap
25.44%
9.02%
Midcap
25.76%
11.66%
Small cap
31.93%
14.13%
ELSS (Sec. 80C)
21.72%
6.57%
Balanced
15.03%
4.13%
4. 
Many investors have the habit of asking this question nowadays. You always advise investor to stay long, but whenever I saw the performance of the fund it is coming down as the year increases. Why I should not book profit every year or more frequently to capture whatever the funds generated.
Investment
1,00,000
Return
16.16%
Duration (In Years)
20
Final Value
20,00,000

Assume every year it generates consistently 16.16% if someone book profit year on year he will get 16160*20=3,23,200 (profit) plus 1,00,000 principle. Totally Rs. 4,23,200. In the growth mode it will be Rs. 20 Lakhs.

5.   The below table captures the real time performance of the fund called Sundaram Select Midcap. In the first 3 years it has compounded 66.98% which is nothing but 4.65 times.

If somebody looks at it has given 66.98% now it is only giving 29.52%. Yes, percentage wise it will come down as the year increases for sure. But, look at the power of compounding, in the last 14 years it has multiplied by 35 times! The illustration is to understand how power of compounding works in the long run and how to understand the numbers!

Sundaram Select Midcap
Investment
1,00,000
Date
 CAGR Returns
Current Value
Aug 1, 2002 - July 31 2003
41.44%
                   1,41,440
Aug 1, 2002 - July 31 2004
57.63%
                   2,48,472
Aug 1, 2002 - July 31 2005
66.98%
                   4,65,579
Aug 1, 2002 - July 31 2006
64.95%
                   7,40,303
Aug 1, 2002 - July 31 2007
59.91%
                10,45,630
Aug 1, 2002 - July 31 2008
44.83%
                   9,22,893
Aug 1, 2002 - July 31 2009
40.30%
                10,70,049
Aug 1, 2002 - July 31 2010
40.17%
                14,90,186
Aug 1, 2002 - July 31 2011
36.06%
                15,97,991
Aug 1, 2002 - July 31 2012
30.82%
                14,68,052
Aug 1, 2002 - July 31 2013
27.78%
                14,82,831
Aug 1, 2002 - July 31 2014
31.02%
                25,58,887
Aug 1, 2002 - July 31 2015
31.89%
                36,53,880
Aug 1, 2002 - May 13 2016
29.52%
                34,95,490
6.   Remember, Investment in mutual fund is only your surplus, not the borrowed money. At the time of investment you have intended to save for longer period, but seeing the volatility you tend to move out which is not right. Volatility is the way of life, it is not RISK!

7.   This is the only investment which is highly transparent, regulated and you have an advisor to handhold you. Investment through your advisor, you are buying a peace of mind. Today, every advisor’s assumed responsibility of reaching all your financial goals is very true and they are really working for you.
With them you can reach your financial goal much faster and you being concentrate on your profession and give more money to create more wealth for your loved ones. Believe me; advisors are working like your personal CFO.
8.     Today, many parents have the habit of introducing to their sons and daughters into housing loan the moment they joined. Their intention is to save money but don’t understand beyond that.

Today anyone job is not defined to one particular area and they keep moving, so either they will not enjoy what they bought are keep buying wherever they move! I will explain how bad it is with numbers to understand one on one if you really want to understand.

9.     Markets are irrespective of the government, environment so on and so forth. Yet it delivered substantial returns in the past. The next 10 years will be better than the last 10 years are equal to 10 years not less than that. This government has all the positive environments to create more growth to our country in the coming years, but it will not be felt immediately and it takes time. We should look only the direction. Direction is right.

10.    Last but not the least, after 10 years from now, am sure everyone will regret for one thing. Either I have not participated in the market rally or I don’t have the guts to invest more money what I had and I invested very little and it’s a costly miss!

We are in a sweet spot both lump sum as well as SIP. SIP is ever green mode of investment. Avoid investing money in PPF for tax saving and invest in ELSS for first 3 years and keep investing the same once 3 years is completed.

Happy Investing

B. Padmanaban, CFPCM
Certified Financial Planner, Chennai
9884349173

Last 100 Month's Return- Share Market Verses Mutual Fund..! Reviewed by S. Chitra on May 15, 2016 Rating: 5 IF you're not gung-ho on India now, when will you be? by Mr. B. Padmanaban, CFP CM Certified Financial Planner,  Chennai  W...

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