Long term Mutual funds investments – my oberservation after 8 yrs – please share your insight.

POSTED BY Nitin Delhi ON April 19, 2013 1:07 am COMMENTS (16)

I am a very busy man (busy running an NGO for children, not a busy industrialist)
I started investing in MFs in 2005.The impression was:
a) nothing beats equity in the long run b) keep your SIPs going for 15-20 years if not until you retire and you’ll get 12-15+ % pa returns c) See equity SIPs as maintenance free long investment (15-20+ yrs)

Over the years I have noticed:
1) Long term SIP investment requires consistent reevaluation: – MFs that are top of the line now may give you just 2% later due to xyz reason. You need to keep switching every year or every few years. When you switch which MF ratings can you trust (MC vs VRO etc) as they differ?
2) What is the best way to switch as the corpus from the old SIP will now be like a lump sum in the new MF?
3) Your 5star fund has been giving you 2-6% per annum in the last year(s) and is now is degraded to 3star. If you switch, you eventual goals (hope of 12-15% pa from equity) won’t meet as the returns of the last two years were below expectations.

After 7-8 years in MF I feel the picture isn’t as rosy / “maintenance free” as it seemed when I started. By the way – I am not talking about market fluctuation just the ups and down in MF returns.
What’s the recommended strategy to simply tackle with MF ups and downs with long term goals (15-30 years)?


16 replies on this article “Long term Mutual funds investments – my oberservation after 8 yrs – please share your insight.”

  1. Dear Nitin, nothing wrong in your way of thinking. personally I also not believe in money worshipping. I’m more interested to create the wealth within the limits defined by me for myself not by my surroundings. Hiring a paid planner or advisor is not going to make you money worshipper but S/he may channelize your energy, resources in a better way.



  2. Nitin Delhi says:

    Dear Ashal,

    *idol = A person or thing that is greatly admired, loved, or revered.

    Point # 1 – is a view of priorities and values in life and its nothing to do with sound financial practices. Objectively speaking hiring a adviser is a smart common sense based choice.

    Subjectively speaking I would not want to hire a service which aims at making rich. I earn enough to live comfortably and save some every month. I don’t want money to become too important in my life (like health and hence visiting a doctor).

    Please forgive me if i came across as giving less importance to the job or advise of a financial adviser.


  3. Dear Nitin, can you elaborate your thinking for point 1 above?



  4. Nitin Delhi says:

    Dear Ashal & Pattu
    Thanks a lot for your valuable advice.
    Here’s what i have learnt from this thread :

    1) If you are busy and want to your money to grow you need a financial adviser.
    Personal view : This is good advice but personally doesn’t suit me. I don’t want to make money another idol in my life and don’t want to hire a priest (Fin adviser) to intercede for me.
    This is my personal view.

    2) Portfolio re-balancing is a must.
    I would like to create a portfolio that requires less re-balancing. I’ll ask my specific questions on a new thread.

    3) Ratings are temporary , don’t bank on them too much.

    Thanks for the excellent learning opportunity guys, this forum rocks.

    1. You can’t take it with you but you sure do need it as long as its not time to go. The minimum one should do is to make sure we have enough money for the bare essential needs. Even this requires either active personal management or professional help. I, like Ashal and you don’t idolize money either.

      Trouble is whether one idolizes or not we have only two choices. Invest time and learn and invest money and get help. Period.

  5. Dear Invest, I prefer to keep low inventories at my house. I said the retail inflation in the above reply just to calculate the earnings from the FDs & the real impact of inflation.



  6. Invest says:

    Dear Ashal

    How do you tackle retail inflation? This is always a fascinating subject for me.

    1) sticking to budget
    2) buy bulk
    3) source from different locations


  7. Dear Invest, the long term view on interest rates is clear to both of us. As the economy grows, the overall inflation ‘ll come down as well as the interest rates ‘ll also come down. We may not go down to the USA levels (0.25%) but certainly a lot lower than the current rates. As on date the Retail inflation for you & me is around 11% & the bank FDs are offering 8.5-9% for long term. Now add the salt of taxation on the injury caused by inflation, are we really earning any positive returns?

    You decide.



  8. Invest says:

    Please read – or else who will give THEM (banks) any money

    or else who will give me(not me, them) any money

  9. Invest says:

    Dear Ashal

    Yes and I knew you would say tax free returns compared to FD πŸ™‚

    Thanks. But for same reason, I am fan of PPF as well.

    My fear debt instruments / FD interest come down in future and I will have to take risk with my corpus by being in equity or other sectors.

    But please correct me if I am wrong banks can lower interest rates only when inflation is not out of hand.
    Basically any organisations that wants to raise money have to offer return/interest that beats inflation or else who will give me any money. Unless central bank just prints and gives them πŸ˜‰

    What happens to a saver like me, who relies on banks to safegaurd and give me returns. Currently how much amount of FD / savings amt is insured in case bank fails? I think it is about that that amount limit is raised.

  10. Dear Invest, thanks for sharing your personal experience. Tax free 10+% is far better than taxable long term Fds my dear friend. So MFs have not disappointed you.



  11. Invest says:

    Interesting thread. Thanks Nitin. I am investing in MF for last 10 odd years as well. Kind of passive investor/manager like you mentioned. Noted and played with largely Big cap equity diversified fund, midcap, debt/balanced fund, sector fund as well. I think it is better to stick with very few equity diversified funds.

    I too noticed some funds rated 5 star e.g. Tata Infrastructure Plan A-G, DSPBR T.I.G.E.R. Reg-G have been a big failuer for last few years and in general for me. Some funds I had selected on my own like Frankline India opportunity and UTI Master value not rated when I bought it gave me awesome returns. So I know big names are no gaurantee and unknowns are not enemies either.

    What I did –

    1) did not get emotional with a fund and sold when it reached my expetation so I have booked profit.

    2) Whenever market went down I bought more

    3) Reliance pharma, SBI contra, HDFC equity and Top 200 did work really hard for me. πŸ™‚

    Anyway long story short on an average with some good and bad funds basket I saw average annual return 10.66% (that is what valureresearch calulators say :-))

    My experiment with direct stocks was not so great. I sold few for nice profit but I realised I was spending too much time, energy and blood pressure monitoring it so I quit doing that. So far direct quity has given me kinda nothing but MF did work for me similar to long term FD πŸ™‚

  12. “Your 5star fund has been giving you 2-6% per annum in the last year(s) and is now is degraded to 3star. If you switch, you eventual goals (hope of 12-15% pa from equity) won’t meet as the returns of the last two years were below expectations”

    This is also not true. You will need to accept equities work this way. Few bad years interspersed with few good years. Historically such behaviour has been shown to provide good returns

    Of course you have entered at a bad time. Since 2005 the market has gone nowhere except stage a recovery. So you will need to be patient.

  13. Dear Nitin, on a simple note, if you are not satisfying with these actively managed MFs, how about investing in passively managed Index fund? There you can expect near benchmark return.



  14. Dear Nitin, what are your selected funds?



  15. If you are busy you should ask a financial planner to look after your portfolio.
    MFs investing is for the long term with annual monitoring and to be done with a clear goal in mind

    No need to follow star ratings. If your fund gives comparable compounded average return wrt peers and consistently beats benchmark over 3-5 years then you should stay invested

    your impression (a) is an expectation not a guarantee. It requires diversified portfolio and rebalancing

    (b) is wrong and can be a very bad idea
    (c) wrong. Equity investing is not a fill it shut it forget it’ kind of thing

    Busy individuals should see a financial planner and let them handle their portfolios.

    A planners fee is anything from 5K to 15K on the low side and in your case will be money well spent. You can focus on the children in peace.

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