November 7, 2012 5:27 pm
To apply value cost averaging,what should be the reasonable annulised return I can fix from Mf.
12% or 15 %?any idea?
Dear Logaraja, You are free to opt any figure, you are comfortable with. As you are investing under a VIP,it does not matter what’syour target return. The only thing matters is you should have deep pockets to run your VIP in case of long bear runs. Here I assume you do have fair knowledge on how VIP works.
In Last 20 years (1992 to 2012) the Sensex has returned a CAGR of 7%. I think, 12% return is one should expect if one invest for very long term 10-20 years. The main problem is when one check past record. They think the price appreciation from bottom and consider top 3 best performing fund in the same time-frame. This is practically impossible for anyone as most of the investor invest through SIP (average price) + they do change their fund after few years of bad performance. Today what looks best may or may not be even good after 2-3 years.
In my opinion, One should expect 12% CAGR return over period of 10-20 years. Anything more will be difficult as few years of bear market makes it average. Like 1994-2004 and 2008-2012. 🙂
What are you trying to acheive with value cost averaging or you trying to calculate money needed for a goal based on this assumption?
The general conservative estimate is 12% from equity MF.
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