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Charts & Analysis

Chart: Five Years of Nothingness

Or almost. Invest using SIP they said. Every month, month on month, you invest money, buying into the Nifty, and your return today, after five years, is a miserable 5.20% per year.

image

This is the lowest five year SIP return since July 2003.

I’ve also shown the impact of buying Nifty as a lumpsum (current 5 year return: 4% annualized), and including dividends (Current 5 year return: 6.34%).

You would have done better with a fixed deposit. All those mutual funds complaining about lack of customers? Or broking companies lamenting the lack of investors? This, sirs, is the reason. When you don’t have returns, you don’t have retail investors. They always FOLLOW; they’ll come back when the returns are fantastic again.

  • Inquisitive says:

    Nice article :
    – Can you provide some colour on the return ? Are these CAGR or Absolute return ? If its CAGR 30 % + CAGR one should exit… But its interesting that it did not occur quite often.
    – On the SIP do you assume its done daily or monthly ? If monthly what date did you pick?
    – I did not quite follow on the Lumpsum investment – Is this more like every day you make a lumpsum investment and track the return 5 years down the line ?
    – 98 -99 and 2001 – Mid 2003 are the worst period for a long term SIP investor…
    5.2 % is bad when you think its risk adjusted return as FD’s at the top tax bracket would have given the same returns…
    Can you compare this with leading diversified mutual funds such as HDFC Top200, DSP Black rock top 100 or IDFC Premier equity Plan A ? For a retail investor one need to compare with the funds (Diversified) which existed from 1998 as Nifty ETF is not available for investing…
    My guess they would have given 8% + which is great post tax return…

    • 1) CAGR – not absolute return. 30%+ looks good to exit only in hindsight 🙂
      2) SIP = monthly, 1st of every month
      3) Lumpsum = put a ton of money down once, five years ago, see moving returns
      4) Yeah, 2003 was the bottom – you saw a hugely negative CAGR
      I’ve used the Nifty. Obviously some funds would do better, I have no idea. I know HDFC Top 200 perhaps has grown more – about 11% CAGR in the last five years. (Don’t know how SIP would do)

  • A says:

    *Awaiting a response from Mr.Subra from Subramoney.com.*