ValuePickr Forum

Long Horizon Investments Advice

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Money will not be withdrawn till 30 years.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.

https://www.google.com/url?sa=t&sou...DRAL&usg=AOvVaw2tFaFwG5vLNm4YTy0TS2rZ&cf=1

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.

These things work great on excel sheets,maybe for one or two three year periods you may get 24-25% cagr but to expect that kind of return is not practical.

In fact,no one can predict what return you will get.

It is becoming harder and harder for mutual funds to beat the index,forget generating alpha.

Right after you invest in a scheme after looking at the 3-5 year returns,suddenly it starts becoming an underperformer.

It is impossible to pick which funds will be the top funds and thus the best thing you can do is to invest in index funds.

3 Likes

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 !

1 Like

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

1 Like

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

1 Like

@amitbansal01 Kondal_Kolipaka @Krishna1

Thank you for your inputs. Based on your inputs, looks like 15% CAGR looks like a more realistic and safer bet, considering a conservative approach.

I plan to invest 10 lakhs via lumpsum and remaining 20k a month via SIP for the next 30 years And I plan on investing equally among large cap, mid cap and small cap equity funds.

At 15% CAGR, what returns can I expect at the end of 30 years.

22,60,06,587.35
Excel formula =FV(0.15/12,360,-20000,-1000000)
Or use this site or app

http://www.fncalculator.com/

Input in tvm calculator (time value of money)

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 ?

Yes
=FV(0.15,30,0,-1000000)
6,62,11,771.96

Compounding actually doesn’t work this way for mutual funds or equity. At the time of selling you can calculate return by using xirr for sip and cagr for lump sum.

This calculation will give you a rough estimate of return if you get exact 15% return every year (which is not going to happen :grinning: as return will vary every year).

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 :slight_smile:).

May be we might get Indian peter lynch some time in the future then it might be possible

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.

@Kondal_Kolipaka @amitbansal01

1 Like

Here is a link to Pattu’s(freefincal) latest video “My retirement equity MF portfolio return is 2.75% after 12 years!”

1 Like

My opinion on your choices:

  1. Avoid investing in more than one fund from the same fund house…
  2. Your exposure to thematic funds (pharma, infrastructure banking etc) should not be more that 5-10% of portfolio…
  3. Plain vanilla funds (Multicap & Large n Mid cap) should be the core of the portfolio…
  4. Generally, 4-5 funds (1 multicap, 1 large n mid cap, 1 balanced, 1 small cap and 1 value) should be sufficient. You can have more exposure to first three and limited to last 2…
  5. In case of SIPs, spread your investments through entire month by scheduling SIPs on different dates… for eg- 1st, 7th, 15th, 21st day of the month.
  6. At least in case of small caps periodic lump sum investments as well as profit bookings depending upon the market conditions are important…

Thank you for suggestion. Considering my long horizon of investment, would more of multicap and a few of small fund make sense ?

@bobbydeep

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.

Ranvir's Portfolio