[SmartCat]

Originally Posted by poloman

If any of us in the forum who started SIPs more than 10-15 years back can divulge the gains they made, it will be helpful.

You can use www.valueresearchonline.com to check the SIP returns of ANY mutual fund. Let's compare SIP returns of an old equity mutual fund like HDFC EQUITY FUND. It is a 3 star rated fund that has been around since 1995, with assets of Rs. 22,000 crores. Since inception, it has returned 18% CAGR.

SIP returns calculator of HDFC EQUITY FUND:
https://www.valueresearchonline.com/...schemecode=219

Let's enter Rs. 10,000 as monthly SIP for 10 years and 15 years, and then compare the returns with that of PPF (since PPF is tax free).



At Rs. 10,000 per month, Rs. 12 Lakhs invested in this fund over a period of 10 years would have become Rs. 20.91 Lakhs. But Rs. 10,000 per month invested in PPF (assume 8.5% interest) over 10 years would have become Rs. 19.18 Lakhs



At Rs. 10,000 per month, Rs. 18 Lakhs invested in this fund over a period of 15 years would have become Rs. 54.71 Lakhs. But Rs. 10,000 per month invested in PPF over 15 years would have become Rs. 36.79 Lakhs.

To calculate PPF returns over a period of time, use this tool:
https://www.moneycontrol.com/persona...ding-tool.html

[poloman]

Originally Posted by SmartCat

You can use www.valueresearchonline.com to check the SIP returns of ANY mutual fund. Let's compare SIP returns of an old equity mutual fund like HDFC EQUITY FUND. It is a 3 star rated fund that has been around since 1995, with assets of Rs. 22,000 crores. Since inception, it has returned 18% CAGR.

I know about the tools, but these figures are not accounted for the investor/human behavior. How many people on this forum itself has stayed invested in SIPs during ups and downs atleast over a period of 10 years? Their experience can help others.

[DigitalOne]

Originally Posted by poloman

I know about the tools, but these figures are not accounted for the investor/human behavior. How many people on this forum itself has stayed invested in SIPs during ups and downs atleast over a period of 10 years? Their experience can help others.

I have :-). I started SIP investing in 2007 (when I had to sign numerous cheques). From a per month SIP amounts of around 5K then to around 40K now, I have been fairly consistent with my SIP. But I have done a few mistakes along the way:
1. Chose dividend option for all funds till around 2013, then switched to Growth option. So no capital gains for initial periods
2. Redeemed significant amounts 4-5 years back; kind of got scared of the risks. Even then I didn't stop the SIPs.

I have stuck with FT Bluechip (stopped SIP last year and moving to other funds), FT Prima, HDFC Capital Builder for these 10+ years. Other funds have come and gone :-).

[graaja]

Originally Posted by poloman

If any of us in the forum who started SIPs more than 10-15 years back can divulge the gains they made, it will be helpful.

I started investing in SIPs about 12 years back. Did not see huge returns in the initial years. But after 5 years, was able to experience the returns (market moving up, power of compounding etc.). I was able to close a big chunk of home loan and a big part of my car purchase from the withdrawals I made from these SIPs after 10 years.

Originally Posted by poloman

SIP is like a huge ponzi scheme for the MF houses. This keeps the money flowing and reduce the redemption pressure compared to lumpsum investments. So all the MF advisors and fund houses will advise to go for SIPs.

Yes. SIPs are better for the fund houses because of the regular inflow these bring. But you cannot rule out the advantages for the investor as well.

[FrodoOfTheShire]

Originally Posted by poloman

SIP is like a huge ponzi scheme for the MF houses. This keeps the money flowing and reduce the redemption pressure compared to lumpsum investments. So all the MF advisors and fund houses will advise to go for SIPs.

If any of us in the forum who started SIPs more than 10-15 years back can divulge the gains they made, it will be helpful.

Originally Posted by poloman

I know about the tools, but these figures are not accounted for the investor/human behavior. How many people on this forum itself has stayed invested in SIPs during ups and downs atleast over a period of 10 years? Their experience can help others.

If majority of the MF investors think of SIPs as ponzi scheme having nefarious intentions and rush to stop SIPs or redeem their units during a downturn, then very few investors would be having a good track record of continuous investment. I feel tools like the one in Value Research can show the factual data without taking human behaviour into account, that can be a good positive information for anyone contemplating stopping SIPs or redeeming units during a bearish market.

A friend of mine used to invest diligently in MFs through SIPs and also through lumpsum investments when NAVs went down. Now he has stopped SIPs, redeemed all units taking a loss and has completely exited the equity market. He couldn't tolerate the losses in his portfolio. Now he says he'll get back into equity once conditions turn favorable.

[poloman]

Originally Posted by FrodoOfTheShire

A friend of mine used to invest diligently in MFs through SIPs and also through lumpsum investments when NAVs went down. Now he has stopped SIPs, redeemed all units taking a loss and has completely exited the equity market. He couldn't tolerate the losses in his portfolio. Now he says he'll get back into equity once conditions turn favorable.

This is what happens to 90% of average Joe out there. The exact reason why one should not go by the tools or calculators but by actual gains people made.
There is something called 'prospect theory'which states that losses have more emotional impact than equivalent amount of gains. People respond drastically to even minor losses. This means rookie investors will sell out assets which are increasing in value and hold on to assets which are spiraling down. This under the strong hope that the asset will one day recover and they can recoup the losses which unfortunately may never happen.

[yosbert]

Originally Posted by poloman

I know about the tools, but these figures are not accounted for the investor/human behavior. How many people on this forum itself has stayed invested in SIPs during ups and downs atleast over a period of 10 years? Their experience can help others.

I do not know how actual investment experiences of real people will help you or anyone else. As you yourself admitted, the investment returns are at least partially influenced by human behavior, so you cannot draw any conclusions from other's experience since that human is quite different from you.
At best they can act as feel good or scary stories depending on the experience you choose. But then again your human behavior will unconsciously filter out or emphasize only the stories that confirm your inherent assumptions.
In my opinion, take the hard figures from the tools and apply whatever behavioral bias/skew you 'think' you possess .

[FrodoOfTheShire]

Originally Posted by poloman

This is what happens to 90% of average Joe out there. The exact reason why one should not go by the tools or calculators but by actual gains people made.
There is something called 'prospect theory'which states that losses have more emotional impact than equivalent amount of gains. People respond drastically to even minor losses. This means rookie investors will sell out assets which are increasing in value and hold on to assets which are spiraling down. This under the strong hope that the asset will one day recover and they can recoup the losses which unfortunately may never happen.

I feel we may not be on the same page regarding what we are discussing. I, as well as other BHPians who've commented recently, are pointing out the benefits of continuing SIPs or remaining invested in good stocks/MFs even during the bear market. The advantage of that has already been posted by SmartCat with the Value Research tool analysis.

As you've mentioned about the human tendency and behaviour of the average Joes with respect to investment during bear markets, I fully agree to that. But if we start looking at what gains such fickle and jittery investors make, I feel that won't provide an objective picture rather a subjective one. So the actual gains such investors make would obviously be lower than what they could've made if they had stayed invested throughout.

Taking the same example of my friend, he was earlier boasting about the huge gains in his MF portfolio. Now he has completely exited the equity market after some losses. If tomorrow he says that equity market, mutual funds and SIPs are bad and how he got burnt, that wouldn't be a fair analysis of the equity market, would it?

[graaja]

Originally Posted by FrodoOfTheShire

...
If tomorrow he says that equity market, mutual funds and SIPs are bad and how he got burnt, that wouldn't be a fair analysis of the equity market, would it?

Very well said. I know at least 4 friends/family members who see someone making money in a growing market, invest in bulk in the market, make some good money in a couple of months, and 6 months later when asked, say MFs/stocks are the worst as they lost lot of money (in a short market correction), and they would never consider investing in MFs or stocks.

That is why when someone asks me for advise for investing, I give them the complete picture, the averaging effect of SIPs, about investing in equity only for a long horizon or 5 years or more, about negative returns during downsides etc. and then ask them to choose.

[poloman]

I am not arguing against investing in SIPs or mutual funds. I am against trapping gullible people with no financial knowledge with past returns figures. In this forum lot of people are there, nearing retirement. How many of us have made significant retirement corpus by investing in mutual funds? This kind of information will help to normalize the human aspect of investment decisions.


There is a well known PMS manager who used to boast about his extremely high returns of more than 50% CAGR in twitter. His recommendations were a rage that time. Money flowed in to his PMS like water. His investments were mainly in to small caps with questionable corporate practices. Every one knew this. He himself boasted about this. Now one can see for oneself what happened to him and his investments. People have lost crores of their hard earned money. He had an option to book his losses but was blinded by his conviction. Now many stocks have become penny with no exit route. He even talked of issuing these shares directly to the customers rather holding via PMS. This situation may be OK for a politician or a money bag. But for a professional all his life time savings are gone.

Now he is passing the blame to government policies for his failure. This is the kind of bulls you encounter in the market.

So people should be aware of both side of stories. For every rupee gained there will be a rupee lost somewhere.

[SmartCat]

Originally Posted by poloman

There is a well known PMS manager who used to boast about his extremely high returns of more than 50% CAGR in twitter. His recommendations were a rage that time.

Porinju

Personally, not a big fan of PMS schemes. These portfolio managers are NOT some kind of financial wizards. Not sure why these guys charge their clients 20% of profits, when we all know that returns from a portfolio in a year is primarily dependent on overall market conditions.

[blorebuddy]

I am a big believer of MFs. If you have the courage to see your gains eroding every day then you can invest in MFs. I have started experimenting with small amount between 2004 and 2010, also I could save only so much. I saw the 2008 crash and my Portfolio value came down by approx 70% from its peak however still it was positive because I have invested through SIP for 5+ years. With in 2 years after the crash the 70% value regained. So you need to stay put and invest based on your ability to stomach the risk. Post this experience, my saving through SIP is increased with increase in income also. Even now I am investing the same amount as I was before this slowdown though there are so much bad news about this slow down and it may last longer than the previous downturns. I do not need this money for next 5 -7 years at least so I am confident that it will come back by then at least. If you see the history only few recessions have lasted for more than couple of years. They are actually referred as depressions which lasted for many years together in the US. Needless to say my gains has been eroded by 10%+ from its peak and prepared to see it going down further. I also admit that significant portion of my retirement corpus is lying in the MFs. Only safeguarding I did this time is moved my 25% gains to debt in 2018. I might have missed some gains made between then and early 2019 however that might help now. Also the money required for next 3-5 years is parked here. The CAGR stands around 14% which I am satisfied with as I could haven’t got from any other investment with the same amount of effort &risk.

I strongly recommend anyone who is planning to start invest in the MF, do it with SIP. This is the time. We have not seen a major crash like 2008/2001-2 so I see this an excellent opportunity. Also we do not know when the next crash will be and how many years from now. I am hoping this will be a rewarding one.

[srsrini]

Originally Posted by poloman

I am not arguing against investing in SIPs or mutual funds. I am against trapping gullible people with no financial knowledge with past returns figures. In this forum lot of people are there, nearing retirement. How many of us have made significant retirement corpus by investing in mutual funds? This kind of information will help to normalize the human aspect of investment decisions.

OK... I would bite this one. Though I am quoting one response, my comments apply to many of the recent comments on SIP.



I have posted in Quora about the real returns I saw with a fund. Here is the verbatim response. (The question was about 10-year returns.)



" Let me give a 10-year history. (It is not for the last 10 years though)
As of Dec 2006, 2927 units in HDFC Equity Fund, average cost of 51.25 per unit
Exited on 21 Jan 2015 (actually moved to direct plan, but still it is a redemption) - NAV about 489 per unit. The redemption value was about 14.3 lacs - almost 10x the investment.
What helped - Held the fund, with conviction, through the 2008 mega bloodbath and 2011 bloodbath. The fund, like rest of equity, had massive drawdowns.
The NAV history of all the mutual funds are available for all to see. So the returns are available. The investor needs to stay in the game to benefit - and this is where many investors may be missing out.

"


And BTW, that particular investment is now in a debt fund in the name of my daughter, who is in 12th now. The value is about 18 lacs. You can imagine how many years of engineering education can be taken care of by that amount



Before I talk about retirement savings, here is another response that I gave for a question that asked if SIPs are good in 2019.



" I would give the advantages of SIP in this particular order of decreasing importance.

1. Aligns with income (for most people) - A majority of the investors are salary earners and they get regular, monthly income. SIP can be set up on a monthly basis to align with the salary date
2. Automatic, takes emotion out - If you have to make product choices every time, you can delay the purchase or make confused choices. SIP helps you to make the choice once and repeat the purchase periodically, in an automated way
3. Makes market timing irrelevant - Particularly for equity mutual funds, people may look to ‘buy on dips’. Setting up SIP on the same day every month takes out this decision. You buy the units, regardless of how the market is doing
4. Enables smaller ticket sizes - Almost all AMCs have lower minimum purchase amount for SIPs - mostly 1/10 of lumpsum amount. For younger investors, this helps to start the investing journey.

If you look at the above list, they are valid for any year and any market situation. If you think that these benefits matter to you, then SIP is a good mode of investment for you.
I have intentionally not mentioned the ‘R’ word in the entire response so far. Unlike what people would like to believe, SIPs don’t reduce risks drastically.
"
I do have issues with the positioning of SIP as a risk-reducer. But it is difficult to argue with the 4 advantages that I mention.



Personally, I have achieved FI (financial independence) and I have started a second career as a fee-only planner. There are two products that have helped me achieve FI. 1. The mandatory EPF 2. The returns from equity mutual funds
I am not putting a separate disclaimer.

[Oxy]

I am 40 and have not bothered with any investment except for a home for end use. Now my home loan is about to be closed so I am planning to start on a few SIPs with the EMI amount that will no longer be going to the home loan. My next goals are my son's higher education/marriage (he is 7 years old now) and my retirement. As time is not on my side, my plan is to go aggressive and stay invested for 7-10 years.

Keeping the above in mind, does the following allocation make sense?

SBI Small Cap Fund - 45%
L&T Mid Cap Fund - 30%
Reliance Equity Hybrid Fund - 15%
Reliance Income Fund -10%

Suggestions would be very helpful.

[audioholic]

Originally Posted by Oxy

SBI Small Cap Fund - 45%
L&T Mid Cap Fund - 30%
Reliance Equity Hybrid Fund - 15%
Reliance Income Fund -10%
.

I am not any fund expert, but I feel the allocation to small cap is quite large and risky. I personally would swap your Equity hybrid and smallcap allocation to make it sound simple.