Clarification on Equity MF

POSTED BY Sachin Kumar Nigam ON March 20, 2012 4:13 pm COMMENTS (6)

Dear Experts!

I have SIPs running for 4 Equity Mutual Funds. What i observe always in valueresearch or be it any other informative site is that the return of an MF is generally more for 3 year period whereas the same return gets reduced ina 5 year period. As the figures are annualised returns. What i want to ask is should one simply redeem the MF once the target annualised return rate of say 15% is achieved after x years. As continuing the SIP for further period may also result in reduced annualised return. 

Is is like redeem when ur expected rate is achieved and then again start a Fresh SIP.

Regards

Sachin

 

6 replies on this article “Clarification on Equity MF”

  1. BanyanFA says:

    Hey Sachin,
    If you want to redeem a MF and then invest it into another MF, then I would suggest that rather keep your existing SIPs running, provided you have invested in a fundamentally good performing fund. I hope you would agree that if you want to invest, it makes no sense to redeem and then reinvest.

    If you could share your mutual fund list, I could comment if you need any changes to get a good long term return.

    Regards
    BFA

    1. Sachin Kumar Nigam says:

      Hi Banyan

      HDFC Top 200 – 4000
      IDFC premier equity (Growth) – 3000
      DSP Blackrock Top 200 – 3000
      UTI oppurtunities – 5000
      SBI Gold – 2000

      I intend to put 2k in Nifty bees after some months. Although i have invested for like 20 year SIPs. But i can stop any SIP any time isnt it i hope it dosent invite penalty charges?

      regards
      Sachin

      1. Dear Sachin, if you are indeed planning to invest for 20Y, where is the need to book profit for every now & then? Please clarify.

        Thanks

        Ashal

  2. Dear Sachin, please read my reply in addition to dear Justgrowmymoney. If you are researching for past 5Y period it includes the crash of 2008 & that’s why the yly return for 3Y period i.e. from 2009 on wards are looking better than 5Y return from 2007 on wards.

    Thanks

    Ashal

  3. wonderful. Just to add one more number to JGMM’s explaination. Invest always with long term commitment.
    Let me give you example you invest 1 lakh and a year later you get 15% returns.
    You end up getting 1.15 lakh. You redeem and spend this money right?

    Instead allow this money to grow… Keep it for 20 years. 1 lakh will mature to 16.3 lakh on annual compounding basis.

    16.3 lakh will alway better value. Allow good amouunt of time for your investment.

  4. SIP is intended to avoid timing the market. After you redeem what if the markets rise 20% in 6 weeks? Would you not lose out such a massive increase in such a short duration.

    All 5 year returns as of Mar 2012 will include performance from Mar 2007 to Mar 2012. To avoid the sudden rise in Nifty from Mar 2012- Sep 2012 a 33% gain in 6 months I am picking the duration from Sep 2007 to Mar 2012. The Index itself might have gained just 300 points (5274 today versus close to 5000 in Sep 2007).over 5 years a 6% increase while several MFs have returned 13-15% annualized yield over the same period which is remarkable.

    To put things in perspective:
    The 5 year return from Sep 2002 to Sep 2007 was 963 versus 5000 => Annualized yield of 39%.
    The 3 year return from Sep 2002 to Sep 2005 was 963 versus 2370 => Annualized yield of 35%.
    making the 5 year yield better.

    The longer the SIP the better the returns. in general

    You save for a financial goal and 2-3 years before the goal you gradually move the needed money to Debt so it is safe and let the rest of the corpus grow. You pull money for the next financial goal and let the corpus grow again.

    If you stop SIP you can never know if you are right until events unfold in future so you bring in an element of speculation – to avoid such speculation is why we intended to have a SIP in the first place!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today