In general, the returns generated from the share markets are a function of the entry timing, longevity of investment & exit timing.
Mutual fund data analysed by CAMS points to a strong correlation between the longevity of an investor's investments & return maximisation in equity funds.
CAMS identified five growth plans of equity category schemes. This comprised 2 diversified equity schemes, 2 balanced funds and one ELSS fund which had the highest NAV.
The current corpus of investment in the schemes was further classified based on ageing of investment less than one year, 1 to 3 years, 3 to 5 years, 5 to 10 years, 10 to 15 years, more than 15 years and finally investment retained from the launch of the scheme.
Comparing the cost value to current market value for each age interval of the selected schemes threw up interesting insights.
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| NK PRASAD, CAMS |
On an average, the investment held for 15 to 20 years multiplied 24 times, 10 to 15 years multiplied 15 times, 5 to 10 years multiplied 5 times, 3 to 5 years multiplied 3 times and 1 to 3 years multiplied two times. Clearly, the longer the duration of investment, the higher the factor of multiplication.
Mutual Funds as multi-baggers..!
An analysis was further carried out to identify the nature of investors and their average investment to get insights into who really benefited from the best performing schemes.
Diversified equity schemes in this study had Rs. 2.47 crore of original investment, which has multiplied to Rs. 113.4 crore.
About 5,000 investors held these investments with an average investment of Rs. 4,700, while the current value of average investment is Rs. 2.16 lakh.
Balanced schemes in this study had Rs. 1.34 crore of original investment, which has multiplied to Rs. 69.9 crore. About 3,000 investors held these investments with an average investment of Rs. 4,436, while the current value of average investment is Rs. 2.31 lakh.
The ELSS scheme in this study had Rs. 0.29 crore of original investment which has multiplied to Rs. 11.1 crore. About 600 investors held these investments with an average investment of Rs. 4,876, while the current value of the average investment is Rs. 1.89 lakh.
The data shows that a very small number of retail investors stayed invested since inception & gained from long-term investment.
Staying invested has helped these investors weather the equity market volatility and bull / or bear runs.
TIME VS RETURNS
Investments held for 15-20 years multiplied money 25 times
Only a small fraction of investors tend to hold on for very long durations
Shorter time horizon generally results in lower returns
About the author..!
The writer Mr. NK PRASAD is President & CEO, CAMS — Computer Age Management Services. While data for the analysis was provided by the CAMS Analytics team, the views expressed by the author in this article are purely personal
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