What the market has taught us

 

 A financial guru has said: -

 “Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars”

 Attempts at timing the market can make investors worse off in the long run than riding out the inherent volatility.  This is simply because it’s hard to precisely forecast how the market will move in the future—unless your advisor is an astrologer who can see & predict the future.

A significant chunk of investor gains over a long period of time is actually the result of only a handful of highest-return days or as we call them, the best days. Miss a few of these and your long-term investment returns can take a big hit.

We looked at the Nifty 50 daily returns from the start, July 1990 till November 2019. Assuming that someone invested ₹10 lakhs in the market at the start of this period (30-years approx.) and stayed put all through, then he would end up with ₹4.30 crores today.

	Invested entire period	Missed 5 Best days	Missed 5 worst days
CAGR	13.70%	11.40%	16%
Value of Investment	4.30Cr	2.40 Cr	7.90Cr.

Since 2000, there have been only 8 years when the stock markets did not reach a new all-time high. More recently, from 2013 onwards, the stock markets have seen a new all-time high in each of the last 8 years except the year 2016.

Profit booking is a mirage

Profit booking is justified only if you can re-invest the booked profit at a higher rate of return, or if you are able to make your seed investment free of cost. Otherwise profit booking merely serves to meet your belief—even if is erroneous.

Profit booking involves reduction in unit holdings. So, when the bullish trends re-appear in the stock market; you make less gains as your unit holdings have reduced owing to profit booking. Let’s explain this by an example.

There are 2 investors holding say, DSP Small cap Fund.

                                                                                 

Mutual Funds are a great vehicle to create wealth over long period of time—and not a money-making platform as is normally perceived.  MF investments has the potential to create 2^nd. Earning member in your family who works for you when you don’t. It ensures you do not outlive your retirement corpus.

We at AIMS have always believed that a lazy portfolio strategy is the best strategy to derive maximum benefit from MFs. It has worked for our personal investments. It can do the same for you too.  Remember, it’s time in the market and not timing the market that creates wealth, as proved by Uncle Buffet

Rejig your MF investments TODAY so as to make the most of the “century belong to India” theme that is currently unfolding.

A case for investing in DSP India TIGER Fund

 02/12/2023

We try to make a case for investment in MFs in infrastructure sector and particularly in DSP India TIGER Fund.

We have short listed funds to create a sample for peer group comparison—as under

·         Funds should have a minimum corpus of Rs.1000 crores

·       Funds should have a minimum rating of 2*

·         Funds should have performance of 10 years in the list

DSP India TIGER fund is a top-notch performer in our opinion. Read on----

The fund –set up on 11/06/2004—has a corpus of Rs.2466 Cr. Next only to ICICI Prudential MF and Nippon India MF.

Now coming to performance, DSP India TIGER fund has featured consistently in top quartile performance.

It has returned (CAGR unless otherwise stated) as follows:-

 

CAGR	Period	Rank
15.76%	15 years	3/15
18.56%	10 years	6/19
20.33%	5 years	6/20
36.99%	3 years	7/20
33.03% (Absolute)	1 year	8/21

 

It has one of the lowest expense ratios in the peer group—2.07.

It has a standard deviation of 16.23 (range of variance of returns from the mean average returns) It has a beta of 0.60 thus indicating that it is less volatile. Every rise of 1 point in the sector—the fund will only rise by 0.60. This implies that the fund effectively protects the downside. The fund manager has been able to generate an Alpha of 9.37 (returns over and above the benchmark due to his expertise and experience.)

Compared to DSP, ICICI Prudential Infrastructure fund has not been able to match the performance of DSP. Although it has a bigger corpus of 3345 Cr. Its performance has been non-consistent. It has a peer group performance ranking of 7/15 (in the 15-year period), going up to 11/19 in the 10-year period. The rank markedly improved to 4/20 during the 5-year period and again deteriorating to 11/21 during 1 year period. A higher alpha of 9.77 has been generated due to higher range of variance (standard deviation) of 17.90 and a higher beta of 0.72 compared to DSP.

On the other hand, while Nippon India Power & Infra fund has also been a consistent performer, its risk stats do not match with that of say DSP. Despite a higher range of variance of 17.18%, a low beta of 0.67, it could generate an Alpha of only 6.80 (compared to 9.37 of DSP)

 

 

So, who would you like to go with?