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| 2017 - year of the Bull |
Wishing
you all a very happy new year, filled with good health, success in your endeavours
and a step forward to complete financial freedom.
2017
has been fantastic for equity investments and do see the chart prepared by
Rajesh below.
Just
wish to make a few observations:
All
those who have remained in the markets since 2008 have truly gained. They have
seen lows and have understood the necessity of asset allocation. They remain
grounded and have taken advantage of this bull run. While, this year has been good and in fact the last 3 years have been great, investors will do well to remember years when things did not go well.
Thousands of new investors have entered the equity through mutual funds – mainly using
SIP as an instrument. The industry monthly SIP book is almost 6000 crores now. SIP
has been a wonderful way to enter for those who earn a salary and for those whose
cash flow allows a specific sum to be invested every month.
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| Source: AMFI |
The
one thing I can say is that simplicity scores over any complicated investment
method. Salaried professionals simply have no time to look regularly at their
portfolio and keep a tactical portfolio running.
There
has been no dearth of social media gyani investment babas waiting
for the market to crash. Some of them seem to be waiting to tell the new entrants into Mutual Funds that mutual funds sahi nahi hai!! Waiting to tell the SIPers that that
SIPing does not take out risk from equity. Today also one worthy on twitter said that he was waiting for years of single digit returns so that his point was proved right! Phew!
No
investor says that SIPing takes out risk from equity investing. And we know that the market
will crash sometime. We SIP not because it is a risk free method of investing, but because our cash flow allows for monthly investments. It is a tool to maintain discipline and automate the
saving/investment process. Using SIP does not mean not allocating to debt! IMHO the best advice is one that makes you STAY THE
COURSE and stick to your investing principles. Stay the course, shut out the
noise and you will do well on your path to complete financial freedom.
Equally,
many gyani investment babas like only 1 or 2 particular fund houses because of their “perceived
honesty” and criticize others. They have have missed out! Be open to ideas. Always be open to new ideas. Approaching investments with a closed mind is having a frog in the well approach There are some great fund
houses with some great schemes and fund managers. You miss out if you do not
use these to your benefit. The light blue line in the chart below is the fund with a low TER and the orange line is a NIFTY ETF. These are one year returns. These are all large cap based funds that I track. So, be open and do not miss out on good opportunities. Yes, times may change and one day we may move into an era of passive investing. Till that time comes, make the best out of active funds. Be open to changing over to passive investing too :)😁
One important point: Many will not agree with me, but I would certainly NOT neglect mid cap based funds just because they have run up a lot. More on this in a future post.
If you've remained in SIP in a mid cap fund for the last 5 years, you've surely got an XIRR of > 25% in that fund. However, keep expectations grounded.
A note on debt: Just because the last one year has not been good for debt funds, do not neglect these. The GOI 10 year bond is at 7.33% now and FD rates are at about 6.75% only for a one year FD. Rates look to be inching higher and definitely bond funds look attractive. Some of the shorter duration and accrual funds we track have all given a CAGR of > 8.5% over 3 years.
Finally a few words for 2018
If you've remained in SIP in a mid cap fund for the last 5 years, you've surely got an XIRR of > 25% in that fund. However, keep expectations grounded.
A note on debt: Just because the last one year has not been good for debt funds, do not neglect these. The GOI 10 year bond is at 7.33% now and FD rates are at about 6.75% only for a one year FD. Rates look to be inching higher and definitely bond funds look attractive. Some of the shorter duration and accrual funds we track have all given a CAGR of > 8.5% over 3 years.
Finally a few words for 2018
- Imbibe principles of personal finance and investing well
- Be disciplined when it comes to working for complete financial freedom and automate the process
- Stay the course
- Do not procrastinate ( in cleaning up portfolio, in rebalancing to original allocation etc)
- Cut out the noise from financial media – learn to filter out the information you need
- Last – take help if you need it.
Once
again, wishing you all a happy, healthy and successful 2018
Mutual Funds are subject to market risk. Read all scheme related documents carefully before investing
