This year , HDFC Prudence has completed 20 years . It is the largest balanced fund in the industry with AUM of ~ 7000 crs having ~ 3 lakhs customers as on 30th September 2014 . In this journey of over 20 years, Rs 10,000 has become ~Rs 4.5 lacs (~45 times) at CAGR of 21%. However , only 2500 investors have stayed through this 20 years journey.
The same thing has happened with Fidelity fund in US , which is more matured market than India . It says that best returns were on accounts that people had forgotten.
The Equity investments are really long term investments . But , the average holding period of an investor in equity mutual fund is 2.5 years which is really sad . However , investors tend to behave long term in nature when it comes to debt investments ….be it PPF ( 15 yrs ) , Traditional policies ( average 20 yrs ) , post office ( 6 to 10 yrs ) , even Bank FD’s.
Investors come across big wealth creation stories through digital & print media . The best examples are Wipro & Infosys and they try their luck but either looses patience in case of short term loss or book immediate profit in case of upside . They tend to forget that these companies have gone through long journey of ups and down . L&T started in 1946 , HDFC in 1970 , ICICI in 1955 , TCS in 1971 & so on and so forth . If you think the new kid on the block Flipkart is new , think again – They started in 2006!
Warren Buffett started investing at the age of 11 years , but he is known after his involvement in Berkshire Hathway from somewhere in 1965 . So , almost 50 years of journey . Berkshire Hathway has delivered CAGR returns of 18-19% over last 20 years .Surprisingly , we have 2500 warren buffet who have stayed invested in HDFC prudence . Perhaps i would say , for the matter of fact , they have outperformed him by 1-2 % .
Investors really lacks in patience when it comes to equity investments and take actions due to availability of continuous flow of information . It is known an Availability Bias in financial behaviour . John Templeton once said that “an investor’s greatest enemy is not really the markets or lack of resources, but really the investor himself”.
Equity is nothing but derivative of the spending . Indian Economy is poised to grow due to its demographics . We have the highest population which are in the age group of 18 to 30 yrs . These youngistans are going to spend like never before .
Have you ever thought… What would have happened if Warren Buffett or Rakesh Jhunjhunwala was born in Afghanistan or Taliban ? Do you think they would known as Buffett or Jhunjhunwala today . These economy has provided them an opportunity & they have followed the rules of equity investment . So , its economy which creates wealth provided you participate in it and stay invested for long with your firm belief & conviction .
You can also become Successful Investors like Buffett , Jhunjhunwala but first become real “ Investor “ then no one can stop you to become successful .