Skip to main content

Subscribe

* indicates required

You can Translate article here

Are mutual funds meant for long term investments?

To be precise, equity mutual funds are meant for long term investments.

The reason is simple. Equity mutual funds invest the money in the stock market. The stock market is volatile in nature. It means the returns are not fixed. I nthe short term, the stock market is more volatile but in the long term, the market trajectory is always towards an upward direction.


Let me explain this volatility with an example of a large-cap equity mutual fund performance during Covid19:

Case 1:

  • If you had invested Rs 1 lakh in Kotak Bluechip Fund - Direct growth just one year ago in Nov 2019, then by March 2020 (within 4 months), you would have lost 33% of your investment value.

Now, just imagine what would be your reaction?

If you are someone who has no idea about how a mutual fund works, you would simply panic! You would think - “What a mistake I have made! Within 4 months, I have lost Rs 33,696. If I continue further, I might lose all my money. So let me exit from this fraud of mutual fund.”

Well, I won’t blame you. Anyone without knowledge about mutual funds would panic with such a loss. Just imagine, if you had invested Rs 5 lakh then you would have lost Rs 1.68 lakh!


Case 2:

But, on the other side, if you had invested Rs 1 lakh on 23rd March 2020 then what would be your investment value by now?

Wow!

Within 8 months, your Rs 1 lakh would be worth Rs 1.66 lakh! That’s a profit of 66% or an annual return of 120%.

Do you know why such a huge difference in return?

Because the market crashed in March 2020 due to Covid19. Hence, if you had invested before the crash, your portfolio would be in red. But, if you had invested during the crash, you would have made a great profit after market recovery.

Obviously, these are specific examples that I have picked just to show the extreme volatility in the market in the short term.


Case 3:

What could be a more realistic scenario?

If you had invested Rs 1 lakh in Nov 2019 and continued till date i.e. almost 1 year, your portfolio would be worth Rs 1.1 lakh.

During this period, the market crashed and recovered.


Case 4:

What if you had made a SIP of Rs 10k/month?

You would have invested Rs 1.3 lakh and your investment value would be Rs 1.5 lakh! Now, this is the most realistic scenario.

Do you know why the returns are better in the case of SIP?

Simply because you invested even when the market crashed. That’s rupee cost averaging. You purchased more units of a mutual fund when it’s NAV fell down.

But the problem is that a lot of investors do not understand the importance of consistent investment for the long term. Many investors fall under case 1 where they invest in the short term and if the market fall, they panic and sell their investments.


If you want to create wealth, you need to invest in mutual funds for the long term.

Do you know how much you would be worth if you had made a SIP of Rs 10k in this same Kotak Bluechip Direct Growth Fund 5 years ago?

Your Rs 6.1 lakh of investment would have fetched a profit of Rs 2 lakh with an annual return of 11.39%. Now, these 5 years include the Covid pandemic, demonetization, GST glitches, US-China trade war, etc. In spite of all these problems, the returns are still great! Hence, if you invest in the equity mutual funds for the long term, then you will fetch good returns.

Just to give you an idea, the same Rs 10k/month if invested in a fixed instrument like FD at ~6% return would have given a profit of Rs 1 lakh in 5 years. (Note: We have not considered the taxation. If we consider taxes, the returns from FD would be even lower than mutual funds)

Having said this, if you are looking to build an emergency fund where you can park your money for the short term and can access it anytime with minimum volatility in returns then you have the option of debt funds like liquid fund, money market fund, etc. Although the returns are not fixed on debt funds as well, you can expect an annual return of 6%-8%.

PS: I opted for Kotak Bluechip Fund only as an example. Mutual fund selection should be done on the basis of financial goals and risk appetite and it would vary from person to person. It is important to build a diversified mutual fund portoflio.

If you invest in Kotak Bluechip fund and want to know where exactly your money is getting invested, you can check the portfolio of the fund. Here is the latest portfolio:

So out of your Rs 10k, Rs 956 would be invested in Reliance, Rs 808 would be invested in Infosys, Rs 789 would be invested in HDFC bank and likewise. But the fund manager would keep churning the portfolio every now and then. This portfolio is as of 31st Oct 2020.

Note: All these screenshots are from moneycontrol website.

Source : Sahil Bhadviya

Comments

Popular Posts of the Week

Is ebiz a scam or true company ?

Friends, Today i want to give review about a private company ebizel.com pvt. Ltd . Friends this company is totally true and registered by government of india.This company provides free e-learning computer education program for some courses. if you have to know all these courses with set of CDs then you can purchase their product at the price of 9556 Rs/-.You have to submit this money as demand draft in favor of ebiz pvt.ltd. After purchasing this product,you can join their commission share program also i which you have to bring many person as you can in their meeting.After that meeting ,senior ebizzors will play with your friends mind to join ebiz pvt. Ltd. If  two of your friend ready to join ebiz,then you will be eligible to earn money at ebiz. It can be look like if u r A ,then first friend B will be on your left leg and second friend C will be on your right leg. If another friend join your group then you can put that on your any of leg.After cre...

How to reach ION DIGITAL ZONE IDZ1 & IDZ2, Mathura road, Near Sarita Vihar

Hello Friends, Today I will tell you about the path of exam centre - " ION DIGITAL ZONE IDZ 2 MATHURA ROAD A 27 MOHAN CO­OP INDU. ESTATE NEAR SARITA VIHAR, DELHI 110044". First of all it is easy to reach there as metro station is near the exam centre.  Nearest metro station to exam centre is Mohan Estate . The common path is from Mandi House to Mohan Estate. It will take around 36 minutes to reach there from Mandi House. After reaching Mohan Estate , move to your left hand side and take a walking distance of around 5-7 minutes. Just follow the path till pillar numbers 294, 293, 292. Both exam centres IDZ2 and IDZ1 come along the way with 2 consecutive cuts (IDZ2 at first cut and IDZ1 at second cut) on the left hand side. I hope it will help you BEST OF LUCK  I hope you like this, so kindly comment below the post and do share your response. Thanks for reading :)

Big scam-Honda lottery promotion BUSTED

HELLO FRIENDS, Today i wanna open a big scam in front of you i.e. HONDA LOTTERY PROMOTIONS. Some days ago on 25 September 2013 i got an email from email address-honda.customerservicedepts@hotmail.com that i have won a prize money of  three hundred and fifty thousand,great Britain pound sterling (355,000.00 GBP),1 laptop & 2 Honda t-shirts. They said that their computer system randomly choose my mail address for being best online from several years. WHEN I READ IT FIRST TIME I WAS SAYING WHAT IS THIS ????????????? I was totally surprised ,here i am providing a pic of that mail You can zoom it by clicking it. After that i just Google on HONDA LOTTERY PROMOTIONS and check it about.After certain investigation on it , i found it as big scam . Now you will be thinking ,i will stop it here. BUT NOT  I just want to know that why are they sending such type of emails. Is it beneficial for sending such type of...

GA Study Notes On Cement Manufacturing

Manufacturing of Cement Cement is essential for construction activity such as building houses, factories, bridges, roads, airports, dams and for other commercial establishments.The first cement plant was set up in Chennai in 1904.It was discovered by an English Mason, Joseph Aspdin in 1824. He called it Portland cement because he thought that it resembled the limestone found in Portland. Approximate Composition of Portland cement Calcium oxide (CaO) 60-70% Silica (SiO 2 ) 20-25% Alumina (Al 2 O 3 ) 5-10% Ferric oxide (Fe 2 O 3  )         2-3% Raw materials are: Limestone -  (provides lime), Clay -  (provides alumina and silica), Gypsum - (reduces the setting time of cement). For a good quality cement, the ratio of silica (SiO) to alumina Al 2 O 3 ) should be between 2.5 and 4 and the ratio of lime (CaO) to the total of the oxides of silicon (SiO 2 ) aluminium (Al 2 O 3 ) and iron (Fe 2 O 3 ) should be as close as possible to 2. ...

England Women cricketer Sarah Taylor new tattoo

Hello Friends, Here is the new pic of Cricketer Sarah Taylor's tattoo at middle of her stomach and back. This tattoo is too sexy and seductive.

What should you never do in life regardless of age ?

Don’t do drugs. I know people who have had drug addictions and it ruined their lives. I even lost my uncle to drugs. Don’t. Eat.Scorpions. Trust me I saw a video about it it wont work out well. Don’t send nudes. I did it once and i’m afraid they’re out on the dark web somewhere. Don’t drive drunk. Don’t go into gangs. It’ll ruin your life and reputation. Don’t cheat on your partner. It’ll mess up their mental state. Don’t act superior to those younger than you. Trust me. Karma will slap you in the face hard if you do. Never never never Never say any racial slur in public. Trust me, I did once while joking around with my friend and it really did not work out well. Don’t spread rumors about someone. Don’t assault anyone in anyway, especially children. Don’t expose anyone’s personal issues or bring them into an argument that is beyond hurtful. Don’t tell anyone’s secrets. They trust you for a reason, you know. Don’t poop on your neighbor’s house because you’re pissed ...

Who are some of the famous Jain Businessmen in World?

1. GAUTAM ADANI (Adani Group.) Richest Jain and the second richest Indian, Gautam adani, owner of Adani Group, a multinational Indian conglomerate company, headquartered in Ahmedabad, Gujarat. India's largest port developer and operator. In gujarat we say if you're cooking with fortune oil, ADANI aapke ghar mein hai (ADANI's in your home). And wait before we move ahead, ADANI's are not sindhi's, neither Gujarat's CM rupani ji, nor computer tycoon Patani ji they're all Jains. 2. DILIP SHANGHVI (SUN PHARMACEUTICALS') Dilip Shanghvi ,The man who own India's Largest pharmaceuticals company 'Sun pharmaceuticals' which also shelters RANBAXY now. 3. INDU JAIN (Times of india.) Owner of TIMES group, India's Largest newspaper and print media group, the times of India belongs to Jain family headed by INDU Jain, not to mention one of the richest Indian women till date. 4. MP LODHA (LODHA GROUP) India's richest reality tycoon, owns Largest real e...

Uttar Kumar is the best actor of Haryanvi movies

Friends, Today i am talking about a Haryanvi actor Uttar Kumar who is very popular among north Indian states for his Haryanvi movies.After seeing the work of Uttar Kumar as compare to other actors in Haryanvi movies ,he can be considered as the best actor of these movies. Uttar Kumar lives in Uttar Pradesh in Hazipur Loni (Ghaziabad). He studied in Allahabad University He has done a lot of haryanvi movies which are quite popular in the states like Haryana,Uttar Pradesh, Delhi and other state people who atleast know hindi.These all movies are not totally pure in haryanvi,they are quite near to hindi language and easy to understand. He also won several awards: 1. Best actor in Haryanvi movies. 2. Dada saheb falke by idea & bijnore press parishad. 3. Kala ratna by an organisation. 4. 2012 & 2013 human rights award by international human rights organisation. 5. Rajiv gandhi excellence award- 2014 Actor Uttar Kumar is quite famous because: 1.H...

10 साधारण सी आदतें क्या हैं जो जीवन को बदल सकती हैं?

चुप रहना। ऊपर वाले ने दो कान दियें है उसका इस्तेमाल करना। लोगो की बकवास बातो को एक कान से सुनकर दूसरे से निकाल देना। अपने पास ब्रेन है और ब्रेन में कई भाग है, जिसमे आप तरह तरह के बातो को हर जगह जमा कर सकते है तो लोगो की अच्छी बातों को इकट्ठा किजिये और बाकी बातो पे मिट्टी डालिये। लोग कितना ही कियु न कहे के आप ये है ऐसे है वैसे है बिगड़ गए है आपमें सलीका नही है इन सब बातों पर भी मिट्टी डालिये और अपनी ज़िंदगी बिल्कुल एक आज़ाद बच्चे की तरह गुज़रिये, जिसे किसी चीज़ की फिक्र नही होती न कल की और न होने वाले हादसों की। अपने सिवा दुसरो पर भी नज़र रखिये खासकर अपने माता पिता पर कियुकि इंसान कि ज़िन्दगी में एक बार नुक्स लग जाए तो फिर डॉक्टर का चक्कर आम हो जाता है। और माता पिता एक ही बार मिलते है। अपने सकुन और खुशियो को दूसरों में नही ढूंढिए बलके खुश रह कर ज़िन्दगी गुज़रिये कियुकि खाने में नमक हो तो नामक की कमि महसूस नही होती और न हो तो खाना बहोत बदमजा लगता है उसी तरह से सच अगर आपके तारीफ में हो तो बुरा नही लगता और अगर आपके खिलाफ हो तो बहोत कड़वा लगता है। कभी कभी अपने दिमाग़ को सकुन दीजये आस पास ह...

छत को गर्म होने से बचाने का सबसे आसान तरीका क्या है?

छत को गर्म होने से बचाने के लिए उस पर चूने से पुताई कर दें। एक हजार स्क्वेयर फीट छत के लिए पांच किलो चूना(डले वाला) रात में गला दें। ध्यान रखें पानी डालते ही इस चूने से खूब गर्मी निकलती है कि पानी उबलने लगता है इसलिए सावधानी रखें। इसे रात भर गला रहने दें। सुबह जल्दी उठकर छत को अच्छे से साफ करें और चूने के घोल को छत पर डालकर झाड़ू से फैलाते जाएं। आप चाहें तो इस घोल में आधा किलो फेविकोल भी मिला सकते हैं। फेविकोल को अच्छे से घोलें और हर बार घोल को हिलाते हुए मग में लें। छत जितनी साफ होगी चूना जितना सफेदी लिये रहेगा छत उतनी ही ठंडी रहेगी। चूने की सफेदी छत पर पड़ने वाली सूर्य किरणों को परावर्तित कर देती हैं और छत ठंडी रहती है। आजमाया हुआ तरीका है पिछले बीस साल से कर रही हूँ Writer: Kavita Sharma

Past Trending Posts