WEALTH CREATING SERVICES, HUBLI
Sunil Lalge ARN 84264
Contact No'S 9341841473
25 yrs ago on this day 21st June 1991, P V Narasimha Rao took oath as Prime Minister along with Manmohan Singh as FM.
Sensex on that day was 1,361 and today is @ 26,800 with a growth of 20 times in 25 years....
This is Indian economy..
Believe in Indian economy invest in Indian Equity.........
MY TAKE ON THIS:
Sensex has definitely given good returns but Mutual Funds has given GREAT returns.
Some funds like
a) Reliance Growth Fund has grown 80 times in 20 years (not 25 years)
b) Birla Sunlife Tax Relief 96 Fund has grown 100 times (Dividend reinvested) in 20 years
even a Balanced Fund like BIRLA SUNLIFE BALANCED 95 FUND has grown by 59 times in 21 years....
So, yes. Sensex has grown well but MUTUAL FUNDS HAS GROWN BETTER.....MUCH MUCH BETTER.
Of course, both the Sensex and Mutual Funds did not have a Linear Growth and they will NEVER have.
That's exactly the reason you need to have an Advisor who can handhold you and guide your investment.
Let me take the example of ICICI TECHNOLOGY FUND.
See the accompanying images....
The fund had gone down from NAV of Rs.10 to as low as Rs.2.4 and sure enough, 999 out of 1000 investors would have panicked and would have stopped their Sips and would have exited the fund as soon as it touched Rs.10 to recover their costs.
We have seen innumerable times, that investors are willing to wait on a LOSS investment to get to their COST value and the same would have happened.
But, a Competent Advisor would have ensured that the investor continued his sip and stayed invested.
This would have now resulted in a return of 18.42% CAGR.
Yes. You read it right it 18.42% CAGR....
The NAV is now Rs.41 (compare it with Rs.2.4)
Just shows that if you stay for enough time in your fund, you WILL get your returns.
TIME IS MAXIMUM importance in investment.
Of course, a Competent Advisor, would have in 1st place, would not let you invest in a Sector Fund (without a exit plan)....that of course, is a different topic which we will discuss some other day.
And, please remember these returns are AFTER seeing many many hurdles/crises like
1. Harshad Mehta Scam
2. Asian Currency Crisis
3. Pokhran Nuclear Test
4. Kargil War
5. 9/11 Bombing
6. Tech Bubble
7. Ketan parekh scam
8. BJP loss in 2004
9. Satyam scam
10. Lehman Brothers collapse
and many many more....
So, friends, please understand Equities is the ONLY asset class which has consistently beaten Inflation and all other asset classes (FD, PPF, Gold) over all periods of time and for you to make money in Equities, the BEST ROUTE IS MUTUAL FUNDS.
So, if you want an exposure in equity, MUTUAL FUNDS is the BEST option
Wealth Creating Services
I would rather say why we have so few investors? By investing money we don't become investors. A right attitude is needed for being a good investor. Attitude coupled with the knowledge of what investing entails.
Most people love "guaranteed returns".
The word "guarantee" is the enemy of investing. Till such time one seeks guarantee forget about growing wealthy.
Nobody can expect to grow wealthy by investing all their money in Fixed deposits.
The pre-requisite for creating wealth is the ability to face uncertainty before you can expect results.
Otherwise it is like First, let my boss treat me well, and then I will try to have a good attitude towards him. Rather it should be I'll display such super attitude towards my boss that he is bound to treat me well.
Remember we won't get sprouts before planting the seeds.
First we have to plant the seeds, have a bit of patience, and we will definitely get the sprouts of success.
Having knowledge is important, having the conviction is important. But above all having the right attitude towards investing is most crucial
Wealth Creating Services
For the last 15 years, I've made it a practice to give performance comparison of various asset classes:
Sensex (Equity), Fixed Deposit (Debt), Gold and Silver and the impact of inflation on them beginning from the financial year 1979-80.
Why 1979-80? That is the year from which Sensex came into existence with base as 100.
1) Assume you've invested Rs.1 lakh each in FD, gold, silver and Sensex 37 years ago. As of 31'st March 2016 the value is as follows- FD:
Rs.19.75 lakhs, Gold: Rs.36.53 lakhs, Silver: Rs.24.46 lakhs and Sensex: Rs.2.53 crores.
2) Unlike other assets mentioned above, Sensex has dividend yield in addition to capital growth. Assuming a dividend yield (duly reinvested) of 2% on an average, the Sensex return works out to Rs.4.76 crores.
3) To put it another way, during last 37 years:
Fixed Deposits has multiplied wealth by 20 times
Gold by 37 times
Silver by 24 times
Sensex by 253 times
4) In terms of percentage, the 36 years return (as given above) is as follows- FD:
8.39%, Gold: 10.21%, Silver: 9.02% and Sensex: 16.13% (18.13% if dividend yield is as assumed above)
5) When we talk about returns, we've to talk about inflation too. The average annualized inflation for the above period is 7.67%.
6) If Rs.1 lakh has been kept under the mattress instead of being invested, it's value has come down to mere Rs.5208 (i.e.) purchasing power of rupee reduced by whopping 95% over 37 year period.
7) What we should look for is real returns (i.e.) returns after inflation and taxes. Since tax differs from each asset class and income category, I've taken only inflation and excluded taxation. Inflation is common for all.
8) After adjusting for inflation, the asset classes have grown by following annualized rate in real terms–
FD: 0.72%, Gold: 2.54%, Silver: 1.35% and Sensex: 8.46% ( 10.46% including dividend yield).
These numbers matter a lot. This is what our wealth would have grown after adjusting for inflation. Since we know the tax details for each asset class and for our income, we can work out the return after taxes too. FD would automatically turn negative. Gold and Silver would have provided a negligible return. Only equity would have provided a real rate of return of around 9%.
9) Gold's real rate of return of 2.54% is made possible due to rupee significantly depreciating between 1980s to early last decade. Otherwise we might have got even a negative return; as globally gold fell by around 70% during the above period. I'll explain this by example.
Assume the rupee dollar conversion rate is 1 USD = Rs.65. For illustration purposes, let us assume the price of 1 gram of gold is 1 USD. With the above conversion rate, the value of 1 gm of gold is Rs.65. Imagine a scenario when rupee depreciates by 100% (i.e.) 1 USD = Rs.130. The gold price remains the same at 1 USD. The value of our gold would increase by 100% to Rs.130 though the price has not changed in the international markets and we being the net importer of gold.
10) Please use FD for contingency or emergency funds. Let gold be part of social requirement and not exceed 5% to 10% of investment portfolio. Silver is again part of only social or cultural needs. Equity is for building wealth.
11) Real estate would normally give returns better than fixed deposits but lesser than equity. There is no reliable long term data available for real estate.
From what I understand from reading, in the long run, real estate can be expected to give 2% to 3% more than inflation. If inflation is 6%, we may expect a long term price growth rate of around 9%. By providing 16% for nearly 4 decades, equity has scored well over real estate. 📈 .....Don't wait, start your investment in(paisa) Equity or Equity S I P or Equity Products (paisa)for long term Wealth Creation..
Wealth Creating Services