Current Age: 28
Investment horizon: 30 years
Amount: 10 lakhs Lumpsum
Expected Returns: Want to double money every 3 years approx.(24% CAGR)
Money will not be withdrawn till 30 years. I may need to move the funds to another type fund after 5/7 years or later if needed, based on fund performance and other factors so that we achieve our goal by end of 30 years. If things workout as planned, the compounding effect (at 24% CAGR) would give somewhere around 100Cr at the end of 30 years I beleive.
This article from ET gives funds which have returned above 20% consistently over many years now. I request the people on this forum to give their valuable suggestions regarding this strategy and which type of funds I should be looking into and whether to invest the 10 lakhs in one go or as installments over a period of 1 to 2 months.
Just a word of advise. While as investors we will hear about the power of compounding and supernormal returns, we need to be aware of the aspect of marketing and biases at work. Returns such as the one you mentioned may or may not be achieved. However, it is certainly very very difficult to be achieved consistently over a long period of time as it involves lot of things going right - such as, stock or funds selection, position sizing, economic growth, India story vs the world, etc. Such type of performance is very rare and hence institutions / investors which achieve such performance are highly revered.
My humble suggestion will be to temper expectation, say nominal GDP growth plus a few basis points. Better to be conservative in expectation and have happy outperformance as against having high expectation and getting disappointed later. The latter is not desirable as it could have significant impact on the investor behaviour for eg chasing risky investments to earn higher return, loss of confidence in stock markets, etc.
Sorry, but could not help giving some unsolicited gyaan when I saw the percentages that you stated. It just resonated with me when I started my investment journey and was chasing returns.
Also, a very interesting topic (Non-ergodicity) for you to read up as you take the plunge. Happy investing !
I started my investment journey in equities 4 years back with a similar kind of profile. Before that, I was investing in MF’s for almost 5 years. I could able to generate 15% CAGR in MF’s from 2011 to 2016.
From 2016 to 2017 Nov, I was fairly doing well and able to generate 30% return on my investment. Can you guess my situation after 4 years…still my portfolio is down with -38%. For almost the last 3 years there are various events affecting the market - Demonetization, GST, Funds rebalance, NBFC crisis, etc…Now the COVID-19.
Why I’m telling you all these…you should have a reasonable expectation like 15% and feel happy if you are able to generate more than that. Of course, you can generate 25% CAGR if you’re lucky and smart investor and able to foresee the future and invest in those companies directly not in MF’s.
It’s almost impossible to generate 25% CAGR by investing in MF’s. At least not in the past. So I would advise you to start slowly and improve your temperament to the market volatility first, and then increase the amount. All the best
As others have already mentioned, generating 24% CAGR over a 30 year period is highly improbable. Just to put things in perspective, Warren Buffett, Benjamin Graham and Seth Klarman couldn’t manage to generate more than 20% CAGR.
I suggest reading the book A Random Walk Down Wall Street
Thank you. So the compounding has to be done monthly to calculate the actual returns. So, for pure lumpsum investment return calculation, the same calculator with annual compounding option and payments option set to zero and periods set to annually holds good ?
Indian markets have matured now compared to last decade so returns might not be as high as it was once up on a time. I was thinking of 12% CAGR. I am very surprised that you are looking for 24% CAGR. I haven’t seen any such mutual fund so far. May be some specific stocks might give you those returns but then you need to do lot of study, take more risk ( I assume only mid and small caps can generate such kind of returns) and bit of luck as well. If you can find something like Avanti feeds (5 rs to 400 rs in last 10 years) and keep invested then it is possible.
I am keeping my expectations very low so that i won’t be disappointed in the end. Just for you to know, I have been investing in MF’s for last 3-4 years let alone doubling money i am in considerable losses as of now.
Majority of the so called investors started with lot of josh and invested heavily and ran away from the market moment market turned negative.
FYI, stock market returns are not linear. You may see even looses after 3 years or even may be 7 years(Heard investors who started investing 7 years back also is in losses, Let that sink in ).
Hi Guys. I have come up with the following list of funds (value, pharma, ethical, small cap) after discussions with my advisor. They are:
ICICI Prudential Value Discovery Fund
DSP Small Cap Fund
Tata India Pharma & Healthcare Fund
Tata Ethical Fund
Axis Focused 25 Fund
ICICI Prudential MNC Fund
Amongst these, I will shortlist 4 to 5 funds for lumpsum investment over a horizon of 30 years and will do the fund switching whenever needed based on factors like growth rate being achieved or nonperformance, etc. My portfolio being planned is 75-80% in Multicap funds and 20-25% in SmallCap funds (DSP small cap).
Request people on this forum to provide your inputs.
Please check/read/understand/reread this whole thread, how the investment strategy evolved over the years, u should get answers to most of your questions: Most simple, yet powerful way of compounding, off course u need/required lots of discipline and perseverance, all the best.