Currently Indian market is in bull phase and the new investors are happy by seeing the growth of their investments. They are hoping that the bull phase will continue forever.
The idea of this post originated from the discussion about the actions people has taken during the 2008 market crash on Facebook Group “Asan Ideas for Wealth”.
In 2008 market crash almost all fund’s NAV dropped significantly. People who are sitting on huge profits suddenly found that now they are sitting on losses. After seeing the market crashed some people stopped investment, some people redeemed their funds and some people continued with further investment.
Let’s try to see the above mentioned three cases and will see their current situation.
Here are the details for the calculations:-
SIP start date 1st Jan 2004 Mutual Fund HDFC Equity – Growth SIP Amount 5000 SIP Mode Monthly (1st of every month)
At the end of year 2007
HDFC Equity
- Growth
|
|
SIP
Start Date
|
1-Jan-04
|
SIP
End Date
|
31-Dec-07
|
Total
Amount Invested
|
240,000
|
Worth
of Investment
|
582,255
|
SIP
CAGR
|
49.07%
|
Bear started in year 2008 and the NAV of the fund starts declining day by day as you can see the below graph.
Let’s see how people reacted to bear and the result of their action.
CASE 1 Sell all the units at the end of the year 2008
HDFC Equity - Growth SIP Start Date 1-Jan-04 SIP End Date 31-Dec-08 Total Amount Invested 300,000 Worth of Intestment 318,065 SIP CAGR 2.38%
CASE 2 Stop SIP at the end of the years 2008 and hold all the units till 30th Jun 2014
HDFC Equity - Growth SIP Start Date 1-Jan-04 SIP End Date 31-Dec-08 Total Amount Invested 300,000 Worth of Intestment at 31st Dec 2008 318,065 Worth of Intestment at 30th June 2014 851,205 CAGR (from 1st Jan 2009 to 30th Jun 2014) 19.22%
CASE 3 Continue the SIP
HDFC Equity - Growth SIP Start Date 1-Jan-04 SIP End Date 30-Jun-14 Total Amount Invested 630,000 Worth of Intestment at 30th June 2014 1,849,337 SIP CAGR 19.62% SIP CAGR (from 1st Jan 2009 to 30th Jun 2014) 20.22%
As you can see from above calculations those who have patience and invest for long term will not get affected by bear market.
If we see the history of market, it is clear that bear or bull is not permanent. For many people bear market is the opportunity to purchase the good funds or stocks in cheap price and creating the base so that they can the advantage of bull run.
Please do share you views.
Disclaimer
“I am not an investor of HDFC Equity Fund. Please do not consider this post as the recommendation (purchase or not to purchase) of HDFC Equity Fund.”
Nice article about long term benefits of sips. It is bear market not beer market.
ReplyDeleteThanks Ravi.
DeletePoint understood. I request, please replace the 'BEER' with 'BEAR' though. :)
ReplyDeleteThanks
Ashal
Thanks Ashal.
DeleteNice analysis
ReplyDelete