Do not Limit Yourselves

 

Do not Limit Yourselves                                             
                          

What is the strongest factor that, impacted our thought while investing? and simple answer is what we will get after the term or kitna deti hai ?

Thus, kitna deti hai really matter, while investing?

If someone had done a fixed deposit (FD) at 12% CAGR for 5 years in year 2000, why 5 years here because we are living in a short-term world, and we never have such forward thinking to do investment for 10 or 20 years. So, we had did FD for 3 or 5 years respectively, and for calculation purpose we considered 5 years here, from 12% CAGR to presently bank FD rates are now stand at 6 % CAGR. If the individual had kept renew his/her FD after completion of 3 years for next 3 years and do this practice for till date than what’s his/her CAGR on FD portfolio?

The right answer is 7% (approx.) or much lower CAGR and for your information it’s not 12% CAGR! So kitna Deti Hai really matters to us? Thus, return percentage are just a nor only!

And when we talk about mutual fund or equity mutual funds than also our practice is same. Like which fund how much giving in term of return percentage. Where equity mutual funds are a volatile instrument and bearing market risk also. Now Kya Mutual Fund Sahi Hai?

Now think for a moment!

What were we trying to do with investments? Where in term of return percentage % is same as future return percentage? but future return is always to be lower than today. We already know that how FD return percentage are coming down from 12% to now at 6%. So, our expectations are much higher from mutual funds & equity mutual funds!

Thus, if FD returns are reduced over a period than equity returns also reduced in same period! Like if we considered SENSEX performance since 1979 to till date than we could found that, equity returns also reduced significantly. HOW?

Considered; Sensex return percentage from 1979 to 1989 than 1989 to 1999 than 1999 to 2009 than 2009 to 2019. Then we could find that how Sensex return percentage are gradually coming down in completion of every 10 years respectively or how Sensex’s compounding effect are gotten low to lower year by year!

Now answer yourselves, have return percentage have any value in your investment decision? Then your answer is NO then now our thinking is towards real-estate must be, but story is same in real-estate also! We cover it in detail in another blog post.

Now we could realize that investment practices are how complex? With above experience how we could archive our future financial goals than?

Now we could realize that an investment professional or MFD (mutual fund distributor) had did how much struggle for our goal not for his/her goal. But his/her main goal is how could we get happiness with our money truly.

Thus, till now one thing is clear that what we could see as return per% today. It will be much lower in tomorrow truly. So, then why we limit ourselves to with certain return numbers. Which had no value in our investment practices truly.

 

Then What?

Simply ask for right investment process, what all about asset allocation is. Thus, asset allocation is the only tool that, promised 90% of our investment objective would be achievable if we practice a solid asset allocation. But must remembered that asset allocation is only copy-right of a professional.

Thus, we could see entire post in different perspective also; how many draw-down or bear phase will be coming in our investment cycle we don’t know! But a solid asset allocation simply generating extra return through rebalancing in every draw-down with much lesser downside effect for a portfolio.

If someone had practiced a solid asset allocation since year 1979 to till date, then their portfolio returns percentage is more than Buffett’s return percentage truly. So why we limit ourselves by return numbers?.

Raja Bhattacharjee

9830146206

investment.junctions@gmail.com