09/11/2012 by Padmanaban Balasubramanian
Sensex closed at 19590 exactly on 5th
November 2007 and after 5 years it is trading at 18762, which means, it
is 4.42% discount till today, if you measure point to point returns!
If you look at the index funds (Passive
Funds, Sensex Based) the average returns of 5 funds returns over the
same period, close to -1.04% whereas the actively managed funds
delivered 3.03%. The difference is 4.07%
If you look at the SIP returns the index
funds delivered 7.2% whereas actively managed funds delivered 10.5% in
the above said period.
If one assume, the SENSEX will only give 5% CAGR for the next 5 years (as on 5th
November 2017), (one can't be more conservative than this assumption),
then the lump sum investment would fetch 5.52% which is 5% CAGR for 5
years, (when index gives -1.04%, fund has delivered 4.07%, if the index
delivered 5% CAGR then it would be 9.57%). Post tax 9.57% is still a
good return in the next 5 years as far as conservative investors are
concerned!!!
Whereas the SIP returns in the last 5
years average itself is 10.5% if you add another 5.52% one can easily
expect 15% in SIP investments which is very good compared to single
digit returns of any type of RDs are concerned.
Based on the above analysis, I would
reiterate what I always recommend, one can easily expect 15% CAGR in a
well-diversified equity mutual funds.
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