Saturday, 15 August 2020

The Illusion of Returns !!!

Dearest investor and friends,

How are you all doing? I hope you & family are safe & sound. 

In March 2020, when we had a market crash due to Covid-19, there were many people & articles talking about Market under-performing Bank Deposit Returns in the last 10 - 15 years time-frame. And this was INFACT TRUE.

So if this was true, are Bank Deposits really better Instruments than Funds or Equity? Are the Returns really better? Then how come, the wealthiest people and most financially independent people invested in Markets? 


Recently, I was reading slogans like "Stock Market Sahi Nahi Hai" or "Mutual Funds Sahi Nahi Hai" etc. You would be surprised to also note that, I received hundreds of emails during that time, asking whether SIP should be stopped or whether we should exit all the stocks in loss. People started talking about Importance of Selling in a Downmarket etc. Comparisons were made to the Great Depression. Whatever we read, it was Negative. 

But a very few of us were encouraging everyone to continue investing in Markets and in Mutual Funds in-spite of returns looking crazily bad. Why were we giving this advice during those times? Why?

I was just looking back at some of my tweets in March. It was so much fun to see that every tweet was received well and we all faced the crash together and came back stronger. Love you all for that.

Also, I got some tweets from few friends saying that their investments have not yielded the returns they were looking for. Why did they not get returns? Is there something really missing? I call this - Illusions of Returns.

Today's article will provide you a much needed perspective.

Compounded Annual Growth Rate (CAGR) or Internal Rate of Return (IRR) is perhaps one of the most less understood terminologies and also, the most misused. In a Fixed Instrument like Bank Deposit, it doesn't fluctuate much. But, in a dynamic Market Based Instrument, the beauty of CAGR/IRR is that it can be made to look really good or really bad, based on the start & end point of the calculation. So, we can feel Really Bad or Really Good based on when we look at it.

Before we begin, please take 10 minutes to read through this article to get a basic understanding of CAGR. Click here to read. If you have not clicked this link, please do. It will be worth your time, before you continue.

As we are all aware, the Stock Market is never Linear. It moves up & down daily. And that what makes Market an easy target for Fluctuating Returns. I keep saying that, in Stock Market, Returns Fluctuate Daily, Value Doesn't.

Assume that on Jan 1st 2010, Kiran started a SIP (monthly Rs 10000) in the following instruments. She knew that RD would give around 5-6% and hence decided not to invest in a Bank Deposit. This is what she did:

She decided to invest monthly in 4 different Mutual Funds - Large, Mid, Small & Index (Rs 2500 each). Here's a small Table for us to refer while I communicate the message.

NOTE: I have taken average Real Funds for this Table (I don't want to Name). Focus only on the Message & the Essence. Try this for your own Funds and see how it co-relates.

She reviewed her Investments Regularly but didn't Churn at all. She did not change her Funds. She Stuck On. In Jan 2019 (after 108 months), she noticed that her Return was around 11% - 19% (across 4 funds). She was Happy. She continued. In March 2020, the Market started Collapsing. She checked her Return. It has down gone to 8%. She didn't Stop. 

In April 2020, her return was almost 0%. Oh my God. She was Devastated. She had absolutely No Returns. It was as good as just putting her money in a Locker at home with 0% interest. She lost all her hope. Her total investment was exactly the money she had put. 

Everyone Laughed. Twitter was full of Jokes against Stock Market. People were Laughing at Long Term Investing. There were commentaries that people should just Sell everything and never Invest in Markets Again.

But, Kiran had great Friends. She had an Amazing Association. She ignored the Trolls. She Didn't give up. She continued her Investment. In Aug 2020, her return is above 6%. She is confident that in the next few years, she will definitely Reach Her Goals.

So, to Summarize:

- Bank Deposits are always Better in the Short Term. I always say - Never Invest Something in the Market which you need in the Next 15 years.

- Taking CAGR below 10 years, according to me, is Misleading. This is because of the fluctuating Nature of Market Instruments. Please keep this in mind.

- When Market Fell drastically, the returns diminished to almost ZERO. Just by NOT STOPPING Investing in Bad Times, the Returns became better as Market Picked Up.

- As Indian Growth Story is Always Intact, the Trajectory is always UP in Long Term. Question is - Are we Ready to Look Beyond Small Time-frames? Can we look at Decades instead of Quarters?

- Association Matters. Absolutely. If we are in the Right Circles, we can Take the Right Decisions. And we can Avoid the Wrong Decisions.

- Have Reasonable Expectations. In an environment where Interest Rates are going towards Zero, the Goal should be to Beat Inflation and Meet all our Goals. If the Expectations are Reasonable, we will Not have the Pressure to Beat Someone's Returns.

- Today, there are Rockets Flying everywhere. Do not get Carried Away. People are looking at 3 month returns & extrapolating. Be Calm. Composed. Stay Long.

- If we can manage Returns of over 10 - 12% over 15 years, that means we are doing Really Well. Focus on the Amount Invested, Time Horizon. Returns will Follow Automatically. Don't Despair.

I sincerely hope that the point is clear now. So next time, if someone says that something is Sahi Hai or Not Sahi Hai, let us use our own wisdom to evaluate.

So friends, Enjoy this wonderful Journey. Keep going. You Can !!!

Let's enjoy what is in store for us. Downturn or Uptick, let's chill.

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Fundamental Investor

Saturday, 28 March 2020

21 Tips During the 21 Day Corona Virus Lockdown in India

Dear friends & investors,

As I write this article, the temperature is 34 degrees Celsius in my city. Nice and hot. We are all under the 21 day lock-down due to the Corona Virus spread. Kids, Parents & Family everyone. Are you all enjoying this period together?

Saturday, 14 March 2020

Corona Virus, 2020 Market Bloodbath & Road Ahead for Indian Investors

March 13th 2020. Friday the 13th. Markets Freeze for 45 minutes. Blood on the Street. Media in Full Panic Mode. Tensions. Frenzy. Mind Stops Working. Friends. Read on...

Saturday, 11 May 2019

Best Mutual Fund for Wealth Creation

What's the best Mutual Funds for Wealth Creation? How do we choose funds? Is there something called a Top Fund or an Under-performing Fund? Which is the best for me? Do we need advise? Read on...

Thursday, 13 September 2018

My Inflation & Balance Sheet !!!

We are all worried about the Inflation Rate of our Country. Also, about the Balance sheets of Businesses. But, have we ever thought - What is my Inflation? How is my Balance Sheet? Read on...

Saturday, 30 June 2018

Magic of Dividends - The Real Return !!!

What are Dividends? Are Dividends Useful? Are Dividends Significant? What Impact do they have? Can they, over a period of time, cover Basic Expenses? Can Dividends Compound? Read on...

Saturday, 18 November 2017

Compounded Annual Growth Rate - CAGR

Ever come Across Following Phrases?
- Our Company has given 33% CAGR Returns in last 30 Years.
- If you had invested in our Mutual Fund Rs One Lakh in 2000, you would have 22 Lakh in 2017 - A Mind Boggling 20% CAGR in last 17 years
- This Company can Grow at 66% CAGR for next 10 years

And they follow this with Disclaimer - Read Offer Document Carefully before investing :-)

What is CAGR Really? Are these Statements Really as Awesome as they Sound? Read on...

Friday, 13 October 2017

Annual Reports FY 2017 Key Highlights

Dearest investors and friends,

How are you all doing? Hope you are all compounding wealth peacefully and steadily.

Apart from the Google Group & MMB, recently, I have been connecting with Investors in Twitter which is a wonderful platform for quick updates. I hope, through these channels, anyone can connect with me at ease and we can have good discussions.

If you like the collective work below, please take a moment and to Like & Retweet this link so that many more of your followers can also benefit.

Click to Retweet 

#AnnualReport #Notes 2017 for #Investor #Community

Click on the below Box for Annual Reports FY 2017 Key Highlights.

Please share the link to your circles on Emails, Whatsapp Groups, Twitter, FB etc so that more and more investors can read, understand, benefit and maybe help by contributing some more Notes.

As of today, the following companies have been covered:

- Piramal Enterprises Ltd
- Indiabulls Housing Finance Ltd
- Edelweiss Capital Limited
- Ujjivan Financial Services Ltd
- Advanced Enzyme Technologies Ltd
- Cupid Ltd
- Avenue Supermarts Ltd
- LT Foods Ltd
- Alembic Pharmaceuticals Ltd
- Finolex Industries Ltd
- V-Mart Retail Ltd
Granules India
- Avanti Feeds
- Murudeshwar Ceramics
- Manappuram Finance
- Maharashtra Scooters
- Future Enterprises
- Cadila Healthcare
- Omkar Speciality Chemicals
- Future Retail
- Virinchi Ltd
Rain Industries Ltd
- Caplin Point Laboratories Ltd
- Vakrangee Ltd
- Nitin Spinners Limited
- Multibase India Ltd
Maithan Alloys Ltd
- IG Petrochemicals Ltd
- Mold Tek Packaging Ltd
- Siyaram Silk Mills Limited
- BSE Ltd
- APL Apollo Tubes Ltd
- P I Industries Ltd
- Jamna Auto Industries Ltd
- KEI Industries Limited
- Raymond Limited
- Spicejet Limited
- Tata Global Beverages Ltd
- Hikal Limited
- Ambika Cotton Mills Ltd
- Persistent Systems Limited
- Motilal Oswal Financial Services Limited
- Alankit Ltd
- Aurobindo Pharma Ltd
- Navneet Education Ltd
- Byke Hospitality Ltd
- Trigyn Technologies Ltd
- Bharat Bijlee Ltd
- Nesco Ltd
- Pondy Oxides and Chemicals Ltd
- Gujarat Narmada Valley Fertilisers & Chemicals Ltd
- Anjani Portland Cement Ltd
- Majestic Research Services and Solutions Ltd
- Strides Shasun Ltd
- Karnataka Bank Limited
- L&T Finance Holdings
- Dilip Buildcon Ltd
- Century Plyboards India Ltd
- Vikas Ecotech Ltd
- Centrum Capital Ltd
- Oriental Carbon and Chemicals Ltd
- Time Technoplast Limited
- Sanwaria Agro Oils Limited
- Eimco Elecon Ltd
- Sharda Cropchem Ltd
- Fineotex Chemicals Limited
- Accelya Kale Solutions Ltd

Every week, Ill be updating you with more and more companies prepared by Friends and Investors.

Enjoy the Read. Let us know you thoughts.

If you happened to like this work and want to continue learning, please subscribe for free email updates by clicking on the box below

Good luck,
Fundamental Investor

Saturday, 5 August 2017

Retire Early with Financial Independence !!!

Retiring early !!! Financial Freedom by 35. Sounds like a Dream, isn't it? Can this really be achieved? Can we start from Zero and still achieve it? If yes, HOW? Read on...