invest in it , consumers are anyways going to increase and so do the consumption , since 2009 this fund has shown higher returns , longer the period , more the investment , means period of investment directly pro to returns.

Dear Sonal, regarding the over all down performance of the market, please do not dump your MF every now & then. give it some time, If it’s continuously sliding, then only you need to change. Here sliding against the category performance as well as benchmark.

Dear Sonal, now do calculate the return generated by the sensex from 20K level in 2008 to 19K lelve as on date? is it positive or negative? Now compare it with your funds’ return & post your findings.

Thanks Ashal, I got the point. The returns from Sensex is negative in this 5 yr time and so the returns from MFs are poor. Please answer for my 2nd question.

It depends on the goal.
If I am saving for a important goal I will use a FD or RD
If I am saving for a slightly flexible and less important goal (going on a trip, buying a camera etc.) I will use a liquid fund

Importance of the goal is more important than tax considerations or return considerations
(for short -term goals)

It is not a question of risk appetite. It is a question of commonsense.

Dear Sonal, I’m staeting from your original query. Last 5Y means from 2008 to 2013. Now can you tell what was the Sensex or Nifty value at the start of this 5Y period in 2008? There lies the answer for your query of low return & not a motivator. 🙂

Regarding the Eq. & Debt asset allocation & rebalancing. I w’d prefer a less active route & w’d like to rebalance on 2-3Y basis. So that you can gaze the performance correctly of your chosen funds.

At starting of 2008, BSE Sensex value was around 20000 and now too that is around the same. Does this imply for the low returns in this 5 yr time?

Yes, re-balancing is necessary in mf investing. But what to do when a equity fund would perform very poorly (below category standards) for more than 2-3 quarters continuously?

Thank you Free Financial Calculator and Ashish Garg.

I got your points. But I have a question. Lets say, I started with a particular Equity:Debt ratio and each year I am maintaining that. But when in future I will see below par returns for 8-10 months through out all equity mfs then what should I do? Which is advised – choosing other equity mfs or increasing the portion of debt?

My basic question is that when to exit from an equity fund and choose an another fund?

OK,Free financial calculators , Then For a short term what could be a good Investment ??
and why you advice me to stay away from MF for such a short period?can you plz explain me I am not so expert.

Arup, returns from equity will fluctuate wildly year to year. Over a long period of time this averages out to a good net return. Over one year it can be +25% or -25%.

If it is +25% great. If It is -25% your goal or intended use of the funds will suffer.

A simple RD or FD will do for 1 year irrespective of tax bracket.
If you want to pay less tax then choose a simple debt liquid fund that should do.

It is true that one should invest in equity mf only if time horizon is long at least more than 10 yrs. But when I see the history of returns for last 5 yr of equity:large cap funds, I dont get motivated as average category return is 5.34 % and return from best fund is 13.51%. (data from Valueresearchonline.com)

How would you advise for long term (5/10/15 yrs) goals?

Fantastic question. To understand equity investing you will need to understand volatility.
When you invest Rs. 100 in a FD with 10% return for 3 years you get

100*(1+10%)*(1+10%)*(1+10%)= 100*(1+r%)
where * represents multiplication. Here r is r the average return which is 10%

If your investment is in equity the annual return will fluctuate wildy
for example
100*(1+25%)*(1-24%)*(1+0.1%) =100*(1+r%)
Now the average return ‘r’ depends on how long you stay invested. Historically r for every possible 15 year period from 1979 to 2013 has ALWAYS yielded positive return and the
‘average’ returns is close to 15% plus or minus (4-5%)

hence history tells us that if you want good returns from equity with very low probability of loss then STAY invested for a LONG time (at least 10 years preferably more)

it is a gamble that we need to take. It is a gamble with historical support. it is also a necessary gamble since equity is the only instrument capable of generating post-tax returns well above inflation.

The idea here is to stay invested in Mutual fund but not the single fund forever. You need to monitor its performance. As and when you see in a long term, the performance is below par, you should move to a different fund and also at the same time align / restructure your portfolio.

For example, you invest Rs.30000 in a equity fund and Rs.20000 debt fund and see that after 3 years of good performance it has gone to Rs.50000 and Rs.25000 respectively. Earlier your equity to debt ratio was 60:40 now it has changed to 66:34. Now lets say, it slows down in equity, you can move your money from equity to debt and come back to original ratio of 60:40 or realign to 40:60. This way you can have better returns than just stay invested in a single fund for 10 years without looking at its performance.

Whole idea here is to invest in equity with a longer horizon but not with your eyes closed.

Thank you Free Financial Calculator and Ashish Garg.

I got your points. But I have a question. Lets say, I started with a particular Equity:Debt ratio and each year I am maintaining that. But when in future I will see below par returns for 8-10 months through out all equity mfs then what should I do? Which is advised – choosing other equity mfs or increasing the portion of debt?

My basic question is that when to exit from an equity fund and choose an another fund?

invest in it , consumers are anyways going to increase and so do the consumption , since 2009 this fund has shown higher returns , longer the period , more the investment , means period of investment directly pro to returns.

investment guru correct me if I am wrong .

Dear Sonal, regarding the over all down performance of the market, please do not dump your MF every now & then. give it some time, If it’s continuously sliding, then only you need to change. Here sliding against the category performance as well as benchmark.

Thanks

Ashal

Dear Sonal, now do calculate the return generated by the sensex from 20K level in 2008 to 19K lelve as on date? is it positive or negative? Now compare it with your funds’ return & post your findings.

Thanks

Ashal

Thanks Ashal, I got the point. The returns from Sensex is negative in this 5 yr time and so the returns from MFs are poor. Please answer for my 2nd question.

Thanks,

Sonal

Hi Free Financial Calculators,

Why do you say FDs are better for 1 year frame?

How about debt funds?

Divyesh,

It depends on the goal.

If I am saving for a important goal I will use a FD or RD

If I am saving for a slightly flexible and less important goal (going on a trip, buying a camera etc.) I will use a liquid fund

Importance of the goal is more important than tax considerations or return considerations

(for short -term goals)

It is not a question of risk appetite. It is a question of commonsense.

Dear Sonal, I’m staeting from your original query. Last 5Y means from 2008 to 2013. Now can you tell what was the Sensex or Nifty value at the start of this 5Y period in 2008? There lies the answer for your query of low return & not a motivator. 🙂

Regarding the Eq. & Debt asset allocation & rebalancing. I w’d prefer a less active route & w’d like to rebalance on 2-3Y basis. So that you can gaze the performance correctly of your chosen funds.

Thanks

Ashal

Hello Ashal,

At starting of 2008, BSE Sensex value was around 20000 and now too that is around the same. Does this imply for the low returns in this 5 yr time?

Yes, re-balancing is necessary in mf investing. But what to do when a equity fund would perform very poorly (below category standards) for more than 2-3 quarters continuously?

Regards,

Sonal

Dear Arup, the unrealized gains mean he has not booked his profit. Profit is only on paper as of now. To book the same, he w’d have to sell his units.

Thanks

Ashal

Thank you very much Ashal.

I have invested in this fund for past 2 years and it has given me very good unrealised gain so far..

Thank you Rajan.But I am not able to understand “unrealised gain” .Can you plz explain me the unrealised gain?

Thank you Free Financial Calculator and Ashish Garg.

I got your points. But I have a question. Lets say, I started with a particular Equity:Debt ratio and each year I am maintaining that. But when in future I will see below par returns for 8-10 months through out all equity mfs then what should I do? Which is advised – choosing other equity mfs or increasing the portion of debt?

My basic question is that when to exit from an equity fund and choose an another fund?

Terrible Idea. Unless you want remain invested for at least 5 or more (preferably much more!) stay away from a mf.

Don’t be swayed by returns from such funds.

OK,Free financial calculators , Then For a short term what could be a good Investment ??

and why you advice me to stay away from MF for such a short period?can you plz explain me I am not so expert.

Arup, returns from equity will fluctuate wildly year to year. Over a long period of time this averages out to a good net return. Over one year it can be +25% or -25%.

If it is +25% great. If It is -25% your goal or intended use of the funds will suffer.

A simple RD or FD will do for 1 year irrespective of tax bracket.

If you want to pay less tax then choose a simple debt liquid fund that should do.

Thank you very much free financial calculators for valuable information .

It is true that one should invest in equity mf only if time horizon is long at least more than 10 yrs. But when I see the history of returns for last 5 yr of equity:large cap funds, I dont get motivated as average category return is 5.34 % and return from best fund is 13.51%. (data from Valueresearchonline.com)

How would you advise for long term (5/10/15 yrs) goals?

Thanks

Sonal

dear Sonal,

Fantastic question. To understand equity investing you will need to understand volatility.

When you invest Rs. 100 in a FD with 10% return for 3 years you get

100*(1+10%)*(1+10%)*(1+10%)= 100*(1+r%)

where * represents multiplication. Here r is r the average return which is 10%

If your investment is in equity the annual return will fluctuate wildy

for example

100*(1+25%)*(1-24%)*(1+0.1%) =100*(1+r%)

Now the average return ‘r’ depends on how long you stay invested. Historically r for every possible 15 year period from 1979 to 2013 has ALWAYS yielded positive return and the

‘average’ returns is close to 15% plus or minus (4-5%)

hence history tells us that if you want good returns from equity with very low probability of loss then STAY invested for a LONG time (at least 10 years preferably more)

it is a gamble that we need to take. It is a gamble with historical support. it is also a necessary gamble since equity is the only instrument capable of generating post-tax returns well above inflation.

Dear Sonal,

The idea here is to stay invested in Mutual fund but not the single fund forever. You need to monitor its performance. As and when you see in a long term, the performance is below par, you should move to a different fund and also at the same time align / restructure your portfolio.

For example, you invest Rs.30000 in a equity fund and Rs.20000 debt fund and see that after 3 years of good performance it has gone to Rs.50000 and Rs.25000 respectively. Earlier your equity to debt ratio was 60:40 now it has changed to 66:34. Now lets say, it slows down in equity, you can move your money from equity to debt and come back to original ratio of 60:40 or realign to 40:60. This way you can have better returns than just stay invested in a single fund for 10 years without looking at its performance.

Whole idea here is to invest in equity with a longer horizon but not with your eyes closed.

Ashish

Thank you Free Financial Calculator and Ashish Garg.

I got your points. But I have a question. Lets say, I started with a particular Equity:Debt ratio and each year I am maintaining that. But when in future I will see below par returns for 8-10 months through out all equity mfs then what should I do? Which is advised – choosing other equity mfs or increasing the portion of debt?

My basic question is that when to exit from an equity fund and choose an another fund?