A 10,000 SIP yielded enough to purchase a Rolls Royce in last one year

The past year has been marked by remarkable growth in equities, with indices delivering double-digit returns. It is amidst this backdrop of financial excitement that we continue our tradition of assessing the performance of India’s oldest mutual funds.

As of March 2023, an investment of Rs. 10,000 per month through a systematic investment plan (SIP) in India’s oldest midcap fund – since its inception (08 October 1995) would have burgeoned into a substantial portfolio of Rs. 13.5 crore. This significant growth, achieved with an investment of just Rs. 33 lakhs over time (Rs. 10,000 per month), underscores the potential of disciplined investing.

Fast forward to March 2024, and the same portfolio has further appreciated by an impressive Rs. 7 crore, reaching a total of Rs. 20.5 crore, with an additional investment of merely Rs. 1.2 lakhs (Rs. 10,000 per month). This exponential growth exemplifies the power of compounding and the rewards of staying committed to a long-term investment strategy.

While the notion of accumulating enough wealth to purchase a Rolls Royce Ghost may seem like a playful exaggeration, the underlying message is profound:

“Start Early, Invest Regularly, Stay Invested.”

This anecdote serves as a compelling reminder to our clients of the importance of consistent and disciplined investment practices. By adhering to these principles, one can potentially achieve significant financial milestones and secure a prosperous future.

We remain committed to guiding you through your investment journey and assisting you in realizing your financial goals. Should you have any questions or require further assistance, please do not hesitate to contact us.

Disclaimer:

The views expressed herein constitute only the opinions/ facts and do not constitute any guidelines or recommendations on any course of action to be followed by the reader. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers

Mutual Fund Investments are subject to market risks. Read all scheme-related documents carefully before investing.

March 14, 2024March 14, 2024

MONTHLY MARKET UPDATE & OUTLOOK – FEB’24

Newton’s fourth Law of Motion: “…returns decrease as motion (trading) increases.”

Sir Isaac Newton is widely renowned for his groundbreaking contributions to science, particularly for his development of calculus and his formulation of three fundamental laws of motion:

Every object persists in its state of rest or uniform motion unless acted upon by an external force.
The force acting on an object is directly proportional to its mass and acceleration.
For every action, there is an equal and opposite reaction.

However, beyond his scientific achievements, Newton’s involvement in the financial markets reveals a lesser-known aspect of his life. In the spring of 1720, Newton became embroiled in the frenzy surrounding the South Sea Company, one of the most sought-after stocks in England at the time. Initially, Newton wisely sold his shares, realizing a substantial profit of £7,000. Yet, succumbing to market speculation and influenced by the prevailing euphoria, he reinvested at a significantly higher price, ultimately suffering a loss of £20,000. This experience left a lasting impact on Newton, who adamantly avoided any discussion related to the South Sea Company thereafter.

Estimates suggest that Newton’s losses, adjusted for inflation, would amount to as much as £40 million in today’s currency.

The South Sea Bubble, as it came to be known, has been labeled variously as the world’s first financial crash, a Ponzi scheme, and a cautionary tale of groupthink leading to speculative mania.

Newton, typically a prudent investor, primarily entrusted his funds to stable government bonds, which provided steady returns. However, the allure of quick gains and the fear of missing out (FOMO) prompted him to deviate from his conservative approach, resulting in significant financial setback.

Reflecting on Newton’s misfortune, renowned investor Warren Buffett remarked in his 2005 annual shareholder letter that while Newton’s laws of motion demonstrated unparalleled genius, his abilities did not extend to the realm of investing. Buffett humorously suggested that had Newton not been traumatized by his financial loss, he might have discovered a hypothetical “Fourth Law of Motion,” illustrating the inverse relationship between investor returns and excessive trading activity.

In summary, Sir Isaac Newton’s foray into the financial markets serves as a cautionary tale, reminding us that even the most brilliant minds are not immune to the irrationalities of human behavior and the pitfalls of speculative fervor.

Quote of the month

The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically, high returns simply imply that an asset has become more expensive and is a poorer, not better, investment.

– Billionaire investor Ray Dalio, Founder, Bridgewater Associates

“India offers best structural growth story among large economies”: UBS

“India likely to grow at 10% for 10-20 years”: Deloitte’s Romal Shetty

“India Rises As An Emerging Markets Darling”

Economic Indicators Overview:

Manufacturing PMI: In February 2024, the Purchasing Managers’ Index (PMI) for the manufacturing sector rebounded to 56.9, reaching a five-month high and extending its expansionary streak for the 32nd consecutive month.

Services PMI: India’s services sector exhibited robust growth in February, with a PMI reading of 60.6.

GST Collection: India’s gross revenues from the Goods and Services Tax (GST) grew at a three-month high pace of 12.54% in February, surpassing ₹1.68 lakh crore.

Equity Market Overview:

The S&P BSE Sensex and Nifty 50 both edged higher by 1.0% and 1.2% respectively in February 2024.
The S&P BSE MidCap rose by 1.5%, while the S&P BSE SmallCap fell by 1.1%.
In terms of S&P BSE sectoral performance, the top performers in February 2024 were S&P BSE Oil & Gas (6.7%), S&P BSE Auto (6.4%), and S&P Realty (6.3%). S&P BSE FMCG (-2.2%) was the only sector that underperformed.
Foreign Institutional Investors (FIIs) were net buyers (Rs 1,539 crores), but it was the surge in Domestic Institutional Investors (DIIs) inflows (Rs 25,379 crores) through Systematic Investment Plans (SIPs) that bolstered the markets.
An impressive milestone was reached as Mutual Funds’ Systematic Investment Plans (SIPs) hit a record high of ₹19,186 crore, surpassing January’s ₹18,838 crore.

Fixed Income:

In the near-term, bonds markets are expected to stay positive mainly due to the expected beginning of a rate cut cycle
Additionally, an increase of FPI debt inflows and attractive global rate cycles will also keep debt markets high
10 -yr -g sec yield is expected to be in the range of 6.5% to 6.75%
1-year T-Bill yields are expected to ease with gradual improvement in the banking system liquidity

Looking Ahead:

India’s macroeconomic situation remains robust, with the recent budget underscoring the government’s commitment to strengthening economic health. However, despite this strength, valuations are not currently favorable. As such, we advise an investment strategy focused on hybrid and multi-asset allocation schemes, allowing for dynamic management of exposure across different asset classes.

Our primary recommendation for new investors considering lump-sum investments is to explore hybrid and multi-asset allocation schemes. These offer flexibility in adjusting equity exposure and reallocating to other promising asset classes opportunistically.

Existing investors are advised to maintain their positions, as India’s long-term growth narrative remains compelling. For those seeking to increase equity exposure, we suggest focusing on schemes with flexible investment mandates that can adapt to changes in market capitalization and sectors.

March 14, 2024March 14, 2024

10 investing concepts we wish we learned in school

Investing is not solely reserved for the affluent. It’s crucial to work diligently in one’s professional life and save money, but it’s equally imperative to invest wisely, ensuring that your money is working just as hard for you. Regrettably, fundamental concepts of investing are often neglected in schools.

Today, we aim to share 10 principles of investing that we wish we had learned at a younger age:

Savings is different from investing: Saving involves setting aside money for future needs or emergencies, typically in low-risk, easily accessible accounts like savings accounts. Investing, on the other hand, involves putting money into assets with the expectation of generating returns over time, often with some level of risk involved.
Goal of investing is to beat ‘inflation’: Inflation refers to the general increase in prices of goods and services over time. The goal of investing is not just to preserve the value of money but also to ensure it grows at a rate higher than the inflation rate. Otherwise, the purchasing power of money decreases over time.

Compound interest: Compound interest is the concept of earning interest on both the initial principal and the accumulated interest from previous periods. Over time, compounding can significantly increase the value of an investment, as earnings generate their own earnings.

Dollar Cost Averaging (‘SIP’): This strategy involves investing a fixed amount of money at regular intervals, regardless of market conditions. By doing so, investors buy more shares when prices are low and fewer shares when prices are high, potentially reducing the overall cost per share over time.

Asset Allocation: Asset allocation involves spreading investments across different asset classes such as stocks, bonds, real estate, and cash equivalents. Since different assets perform differently under various market conditions, diversifying across asset classes can help manage risk and optimize returns.

Risk is different from volatility: Risk refers to the potential for loss, while volatility is the degree of variation of a trading price series over time. Understanding this difference is crucial, as not all volatility equates to risk, especially for long-term investors.
Keep taxes at the lowest possible: Taxes can eat into investment returns, so it’s essential to minimize tax liabilities whenever possible. Strategies such as booking profits under section 112A every year, investing in equity-oriented mutual funds for more than one year for lower taxation, taking benefit of indexation and investing in ULIPs up to the maximum possible limit will help reduce the tax burden.

Odds of succeeding increases as the time horizon increases: Investing with a longer time horizon typically reduces the impact of short-term market volatility and allows investments to potentially recover from downturns. Over longer periods, there’s historically a greater likelihood of achieving positive returns, as markets tend to trend upwards over time despite short-term fluctuations.

Market works in cycles: Markets are inherently cyclical, experiencing periods of expansion, contraction, and consolidation. Recognizing these cycles can help investors navigate market fluctuations more effectively. Strategies such as buying low during market downturns and selling high during periods of growth can capitalize on market cycles.

A stock is not a lottery ticket but an ownership in the business: Investing in stocks means buying ownership stakes in companies. Unlike lottery tickets, which offer purely speculative returns based on chance, stocks represent ownership in real businesses with tangible assets, revenues, and earnings potential. Understanding this fundamental principle can lead to more prudent investment decisions based on the fundamentals of the underlying businesses.

Track your Portfolio

Month: March 2024

A 10,000 SIP yielded enough to purchase a Rolls Royce in last one year

MONTHLY MARKET UPDATE & OUTLOOK – FEB’24

Newton’s fourth Law of Motion: “…returns decrease as motion (trading) increases.”

Quote of the month

“India offers best structural growth story among large economies”: UBS

10 investing concepts we wish we learned in school

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