Did your Mutual fund Investment deliver a 100X return?

You must have heard stories of some companies whose shares had delivered 100x returns in the past 20-30 years. These kinds of stories revive and regain strength when the broad market reaches a psychological milestone. Like in today’s time when sensex touched 70000.

All these stories are bound to increase your confidence to enter the stock market and invest in Equity shares for the long term, so you can also participate in Country’s Growth and be truly wealthy.

However, that’s another story that in such bullish times, Investors also keep hearing of the stocks which had delivered 5x, 10x kinds of returns in 1-2 years time frame, which changes the whole idea of the long term and now new investors seek fast money. Also, in this strong urge they are also not afraid of investing through F&O in the lure of making money fast , even when SEBI research shows that 9 out of 10 Individual Traders in the Equity Future and Option Segment, incurred Net Losses.

They need not do any kind of deep research to find good stocks, as in such times you will find many social media channels, business news channels and influencers promoting themselves with such suggestions. 

And under the notion of making money in bullish times, these Reels and Videos are considered as “FREE ADVICE from the experts” by the novice investors , until they lose money big time. Also Read: The Real Cost of FREE Financial Advice

Yeah…Bullish times going on. But how long will it last and when will it last, no one knows. But one thing is for sure, that long term is always bullish and one can make a great wealth if one is disciplined enough.

And this is where products like Mutual funds come into the scene. In Euphoric times like today, they do not get enough respect that they deserve, as they are not designed to make money fast due to the diversified and professional structure. But yes, if someone has a Very long term vision and is really serious on building wealth, then even Mutual funds can help and that too in a Risk adjusted manner. Read More: What is Mutual Fund: Types and Concept Explained

You don’t believe it? Check out the numbers below

Mutual funds Investment Returns for the Last 20 plus years

No, I am not suggesting the fund names for your investments, but just showing that it’s not only in MRF/Wipro/TCS/Infosys or any other stock for that matter, or some Real Estate Project. Even If you had stayed invested in the Mutual funds for that long, you would have made up to 300x kind of returns.

The whole point is how long can you stay invested in the volatile environment. In good times every second person wants to enter the equity markets, but what about bad times? Read more:5 Best Things to do in Volatile Markets

The new investors who have entered post 2020 Covid fall have not seen the bad times yet. But like the bull phase, the bear phase is also a reality and one should always be prepared for that.

Yes, in the Hindsight you can see where we have reached , but participating in the slowdown and seeing the investments in RED or not moving for 3-5 years, requires hell lot of patience.

You can see in the above chart what the sensex has gone through in the past 32 years, and just imagine the state of investors who had invested in any company or in Mutual funds during these times. Some had withdrawn in losses, some had got their capital back, some had doubled their money, some might have tripled or even 5 times…but I am not sure how many investors had actually participated in this 100X journey.

In today’s time besides volatility, there are many other distractions which do not let you build your wealth. Some you have already experienced in the past.

• You switched from Regular to Direct to save on Expense ratios and Mutual fund distributors commission. 
• When the focus is on saving cost, you also question Advisor’s Fee as you think you are disciplined enough and can do it yourself through Fintech platforms. 
• Later you moved from Active to Passive and started questioning Fund Manager’s Performance. Read More: Index funds in India – How attractive is Passive Investing?

And even after all these switches you are still not satisfied 

• This is not all, you also switch/redeem based on the past 6 month/1 year return of your investments, doing comparison with other schemes as shown by your mobile app. Also read : What is a Good return on your Investment?

• You start looking at PMS when your Investments reach a certain corpus questioning Mutual fund performance, and later move to ‘Small Cases’ kind of product questioning PMS performance. Read more: PMS Investment |How PMS is different from Mutual Funds: A Complete Guide

• Since you have also heard stories of real estate from your parents and also seen many of your colleagues making big money in properties, so you redeem your Mutual fund investments to buy properties, also you do not shy from taking loan, and thus compromise SIPs with EMIs. 

• Mutual funds never excite you. It is a Boring and slow Investment. So why not look at Angel Investing, Cryptos, Unlisted securities, Invoice discounting…and never shy from exploring the other Alternative Investments. ( I am writing a series of articles on these…will share soon)Also Read: Cryptocurrency – Is it worth riding the wave?

• Even Seasonal Mutual fund Investors ask for “Better” options these days. (Read: Average Investor Story)

The above are some of the reasons why a long term investor in the beginning, redeems the mutual funds investment in the short term. But if you really got the Gist of the article then never make such mistakes for the next 25y to 30y if you seriously want to see a big impact in your wealth creation.