[m8002?]

Originally Posted by poloman

Sorry for being pessimistic. Really affected by plight of friends who are sitting at capital losses of over 60%.

Is 60% loss of capital for MFs or shares? Most Equity funds should be down around 20% even if they had invested lumpsum at the peak.

[carboy]

Originally Posted by poloman

The definition of long term is getting blurred. If 10 year returns also is matching the FD returns one has to seriously ponder what is going wrong.

I am not expressing any opinion on the issue itself, but his example of 9.2% returns is returns in $ in the US equity market. And one cannot match that using FDs in the US.

[SoumenD]

With around 5k drop in a week, sensex is at a 32 month low. Is it advisable to buy some Index funds now? If yes, can you please suggest a couple of good funds?

[ridehard]

Originally Posted by SoumenD

With around 5k drop in a week, sensex is in 32 months low. Is it advisable to buy some Index funds now? If yes, can you please suggest a couple of good funds?

For index funds, go for ones with the lowest TER, and tracking error. UTI , HDFC are good.

[SoumenD]

Originally Posted by ridehard

For index funds, go for ones with the lowest TER, and tracking error. UTI , HDFC are good.

Thanks. Yes, I have been eyeing the HDFC sensex(Direct) plan for sometime now & the TER is 0.1%. Was waiting for the market to crash a bit before starting with any investment. But the thing about market is, you never know if it will further crash next week & you end up feeling maybe I could have waited some more time and booked better returns

Maybe I will do it in bits.

[poloman]

Originally Posted by m8002?

Is 60% loss of capital for MFs or shares? Most Equity funds should be down around 20% even if they had invested lumpsum at the peak.

These are guys who invested in some mid and small caps during the peaks in 2018. Some of these stocks never recovered. Sorry if I was not clear. MFs have not gone that far I agree.

I am simply advising people in their late 30s and 40s to be careful about these long term investment scenarios propagated by AMCs and other experts. For them 10 year is a clear long term timeline where they may need corpus amounts for some or other reasons. They may end up losing the life time savings or may be in dumps when they need it.

I am not expressing any opinion on the issue itself, but his example of 9.2% returns is returns in $ in the US equity market. And one cannot match that using FDs in the US.

I am referring to Indian scenario. I have a 10 year FD still running at 9.5% interest rate. You can check the performance of some blue chip funds during the same period.

[SmartCat]

Originally Posted by poloman

The definition of long term is getting blurred. If 10 year returns also is matching the FD returns one has to seriously ponder what is going wrong. If you are in a recession stage when you need the money the returns will be seriously eroded. This tag line Mutual funds are for Long term investment is a clever one coined by the industry for their own survival. It is a blood bath out there. It may be a blip or full fledged recession. But gains made in years are getting wiped out in days and hours. Sorry for being pessimistic. Really affected by plight of friends who are sitting at capital losses of over 60%.

Let me approach this in an unconventional way -

- Let's say you bought an apartment in 2012 for Rs. 50 Lakhs
- In 2016, you see that many apartments in your complex are being sold for around Rs. 1 Cr. You are happy obviously because of the good decision you made. You have doubled your investment in 4 years
- Demonetization happens. Nobody has cash to buy, because there are other important things to think about.
- Now, you put up your apartment for sale.

What kind of offers will you get? Rs. 1 Cr or Rs. 40 Lakhs? Now, just because you got a quote for Rs. 40 Lakhs, you don't have to sell it at the price. It does NOT mean that the investment you made in 2012 was a bad investment. What it means is, it is not the right time to sell your apartment (because of demand issues). Ditto with equities. Whenever there is crisis, equities fall in value because of lack of investor interest. That doesn't mean that investment made in 2015 was a bad investment.

Conclusion: You sell equities (or real estate) when you WANT money for some other purposes. Not because it is up 3x or down 50%.
PS: Fixed Deposit or Debt MFs are excellent investments. Everybody should have atleast 50% of liquid assets in these vehicles.

[m8002?]

Originally Posted by poloman

These are guys who invested in some mid and small caps during the peaks in 2018. Some of these stocks never recovered. Sorry if I was not clear. MFs have not gone that far I agree.

I am simply advising people in their late 30s and 40s to be careful about these long term investment scenarios propagated by AMCs and other experts. For them 10 year is a clear long term timeline where they may need corpus amounts for some or other reasons. They may end up losing the life time savings or may be in dumps when they need it.


I am referring to Indian scenario. I have a 10 year FD still running at 9.5% interest rate. You can check the performance of some blue chip funds during the same period.

When someone is playing with mid and small caps, they should be prepared to get burnt. Its a high risk and high rewards game.

You can see the returns from some good equity mutual funds for the last 10 years. Most of them have returnd around 12%, some going all the way to 17%
https://www.valueresearchonline.com/...urn-period=10Y

My own SIP running for more than 13 years has an annualised return of 12% today. It was around 13.5% one month back.

[poloman]

Originally Posted by SmartCat

Let me approach this in an unconventional way -

- Let's say you bought an apartment in 2012 for Rs. 50 Lakhs
- In 2016, you see that many apartments in your complex are being sold for around Rs. 1 Cr. You are happy obviously because of the good decision you made. You have doubled your investment in 4 years
- Demonetization happens. Nobody has cash to buy, because there are other important things to think about.
- Now, you put up your apartment for sale.

What kind of offers will you get? Rs. 1 Cr or Rs. 40 Lakhs? Now, just because you got a quote for Rs. 40 Lakhs, you don't have to sell it at the price. It does NOT mean that the investment you made in 2012 was a bad investment.

@smartcat I agree to what you are saying. Now imagine another scenario. A guy in his forties started a long term investment plan for his daughter's higher education 10 years down the line. He was convinced by the tagline that mutual funds will offer returns in long run.
Now when daughter is ready to go abroad for her studies and a major crash like this happens. What will be his options? Sell units at what ever price he gets at huge real losses/opportunistic losses or wait till market recovers sacrificing his daughter's future.

[SmartCat]

Originally Posted by poloman

A guy in his forties started a long term investment plan for his daughter's higher education 10 years down the line. Now when daughter is ready to go abroad for her studies and a major crash like this happens.

This is a low probability event - markets crashing at the same time that this guy needs his money. But there is a solution:

What will be his options? Sell units at what ever price he gets at huge real losses/opportunistic losses or wait till market recovers sacrificing his daughter's future.

He should have invested 50% of his savings in FD or debt mutual funds every month. In case of low probability events like this, he has the option of liquidating his FD/debt mutual funds

Also, remember that an Fixed deposit investor has worries too.:

1) He needs to worry about falling interest rates. Developed countries are at zero interest rates. Even in India, if crude stays low and inflation stays low, we can see lower and lower rates. In 2003, Fixed deposits returned 4% per year. In 2004, I got a 5 year car loan at 5.5% pa!
2) Worries about bank closures (for FD investors) or NPAs (for debt MFs investors)

[warrioraks]

A smart person who is saving for a milestone like child education would cash out some gains at regular intervals and put it into FDs or debt funds to prevent such an erosion.
Expecting your equity investments to show even gains perpetually does not tie out to the way this instrument works. The biggest challenge is people want high returns that equities deliver without realising that there is considerable risk involved.

I would be really pessimistic if a bank defaults on my fd interest payments, but blaming the equities and AMCs when market tanks seem to be just rants imho.

[carboy]

Originally Posted by SmartCat

This is a low probability event - markets crashing at the same time that this guy needs his money. But there is a solution:
He should have invested 50% of his savings in FD or debt mutual funds every month. In case of low probability events like this, he has the option of liquidating his FD/debt mutual funds

I am not sure if bear markets can be called low probability events. Markets have been unusually bullish in the last 10 years (probably because Govts have started reacting more to the stock markets rather than to the economy itself), but that's not historically true.

What exactly do you consider as low probability - 10%, 20%, 40% or what? And how do you come to the conclusion that it's a low probability event?

[Santoshbhat]

Originally Posted by poloman

@smartcat I agree to what you are saying. Now imagine another scenario. A guy in his forties started a long term investment plan for his daughter's higher education 10 years down the line. He was convinced by the tagline that mutual funds will offer returns in long run.
Now when daughter is ready to go abroad for her studies and a major crash like this happens. What will be his options? Sell units at what ever price he gets at huge real losses/opportunistic losses or wait till market recovers sacrificing his daughter's future.

An investor needs to understand the risks associated with each asset class and how it suits his purpose of investment. Equities always carry higher risks but also the potential to earn higher returns. The more time one stays invested in equities, there is a higher chance of earning more returns than steady low risk low returns kind of assets. If the guy in your example wants to build a corpus to fund his daughter's education at age forty with a 10 year horizon, then investing in 50 : 50 equity and debt mix is advisable for the conservative investor. Say if he thought this through early enough and started investing from his twenties when his daughter was born, then maybe a 100% equity option works better. He knows he is going to need the money by xxxx year. He should start moving to debt atleast three or four years in advance. By the last year or so it is better to completely switch to liquid funds or other zero risk options and protect his captial. Because he can't risk a crash in the last year.

[Chetan_Rao]

The PR slogan 'Mutual Funds Sahi Hai' is not intended to mean choose whatever out of a basket and it will give you guaranteed returns. Diversification is always key, putting all (or most of) one's eggs in a single basket, because the basket looked good at a point-in-time is a horribly risky approach.

There's plenty of options for each type of investor (gung-ho, balanced and totally risk-averse), and one should usually carefully choose what best fits their investment horizon and risk appetite. The first question my investment adviser asked me was 'What's your risk appetite and investment horizon like?', before we even began discussing what kind of instruments (MFs, deposits, bonds etc.) exist, then moved the conversation to what I should be investing in.

I have liquid savings or short-term stuff I can pull out for emergencies, but I'm not losing sleep over my long-term portfolio at all (though my MFs are still all above water as of last month's eCAS statement). There will probably be more market swings before it's time for me to cash out, and one thing I do intend to do is move my assets to more conservative, lower-risk instruments as I get closer to my retirement goals.

[SmartCat]

Originally Posted by carboy

I am not sure if bear markets can be called low probability events. Markets have been unusually bullish in the last 10 years (probably because Govts have started reacting more to the stock markets rather than to the economy itself), but that's not historically true. What exactly do you consider as low probability - 10%, 20%, 40% or what? And how do you come to the conclusion that it's a low probability event?

Based on history and based on number trading days, we can say that NIFTY is in a bull market 80% of the time and bear market 20% of the time. But grinding bear markets don't bother investors much. It does not ring alarm bells. That's because some stocks will be doing quite well, and it is likely that mutual fund manager is invested in those. When large caps are falling, mid/small caps could be rising and vice versa. Eg: Mid and small cap indices/stocks are in a bear market since 2018. You did not see too many people complaining because NIFTY/largecaps were hitting all time highs.

What bothers investors is market crashes like this -

- On an average, NIFTY moves up or down 0.75% per day.
- In a year (250 trading days), NIFTY makes greater than 2% moves (up or down) a day about 5 times on an average. That's a 2% probability.

But crashes (7% down day) like these are extremely, extremely rare. This is the first time NIFTY/S&P500 has crashed 20% from the top in 3 weeks. These are called BLACK SWAN events.