*Sunday Financial Literacy*
Direct Stocks versus Mutual Funds!
First how do you get multi-baggers without the possibility of permanent loss of capital!
Yes you can by investing in equity MFs.
In Indian equity markets, money doubled every 4.5 years. For the purpose of simplicity let's assume money doubled in every 5 years. At this rate of growth let's say how many times your wealth could have grown.
Years Growth of wealth
5 years 2 times
10 years 4 times
15 years 8 times
20 years 16 times
25 years 32 times
30 years 64 times
35 years 128 times
40 years 256 times
45 years 512 times
50 years 1024 times
Yes with intermittent volatility!
Now look at the performance of direct stocks!
Performance from 2016-2021 (5 Years)
Large Cap Stocks (100 stocks)
- 74 stocks delivered 12% CAGR
- 25 stocks delivered zero returns
- 1 stock delivered negative returns
Compare this with LC equity MFs.
- Worst Fund 11% CAGR
- Category Average 16% CAGR
- Best Fund 20% CAGR
MId cap stocks (150 stocks)
- 77 stocks delivered 16% CAGR
- 61 stocks delivered 10% CAGR
- 12 stocks delivered negative return
Now look at performance of mid cap funds
- Worst Fund 13% CAGR
- Category Average 17% CAGR
- Best Fund 24% CAGR
Small cap stocks (2680 stocks)
- 1 stock delivery 93% CAGR
- 20 stocks delivered 46% CAGR
- 2651 stocks delivered 2% CAGR
99% of all the small cap stocks delivered just 2% CAGR. So much so for multi- baggers in small caps!!
Performance of small cap funds
- Worst Fund 14% CAGR
- Category Average 20% CAGR
- Best Fund 25% CAGR
Mint Report
Mint looked at direct stock returns from Jan 2002 till Jan 2022.
- Out of 600 stocks around 1/3rd stocks delivered 20% CAGR generating 87 times wealth.
How much MFs have done in this period.
- Worst Fund 12%CAGR 11 times
- Worst 3 Fund 13% CAGR 13 times
- Worst 5 Fund 14% CAGR 14 times
- Nifty Fund 15.5%CAGR 18 times
- Avg Fund 19% CAGR 36 times
- Best Fund 26.8%CAGR 100 times
25 years (1996-2021)
-Worst Fund 12% CAGR 17 times
-Worst 3 Fund 13% CAGR 20 times
-Worst 5 Fund 14% CAGR 26 times
- Cat Avg 19% CAGR 74 times
-Best Fund 25.8%CAGR 300 times
(HDFC TAX SAVER FUND)
