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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Success
Failure
C. Muthuswamy (a fictional character), 56 years of age, is unfazed when you ask him about the panic caused by COVID-19 on the stock market. “The markets have fallen. So?” he asks. Isn’t he worried about his mutual fund portfolio? “No. This happens every few years. Now I am used to it,” he says. Mr. Muthuswamy is not a mutual fund manager. He has never bought or sold a stock in his life. He works in middle management for a manufacturing firm. How is he so relaxed? Does he know something the rest of us don’t?
He sighs and takes us through his journey.
When Mr. Muthuswamy was 30 years old, he started his first SIP in 1994. “A friend of mine from the finance department made me start it. He said, if I put Rs. 5,000/- into a fund every month, I would have to worry less about my retirement,” he says.
The first time the markets received a shock was in 1997 when the South Asian crisis hit. “I panicked and called up my friend. He told me to stay invested, if not increase my investment amount. I am so glad I listened to his suggestion,” says Mr. Muthuswamy. His portfolio took another hit in 2000 when the dot-com bubble burst.
Then there was the global financial crisis of 2008. “I kept investing my money into diversified equity funds. By then I had added more funds and even increased the investment amount over the years. A portion of my portfolio was for retirement. Another portion was for my child’s education. Since my child’s education was due in 2017, I stopped that portion of SIP a few years before and moved that money to a fixed deposit, so that it remained safe. Overall most of my funds have been good to me.”
Muthuswamy has invested in large and multicap mutual funds similar to the ones recommended by Kotak. Let’s look at some mutual funds currently recommended by Kotak and their SIP returns since inception:
Source: MFI Explorer, All data as on 30th September, 2020
“Thanks to my investments, I was able to send my child to the US for her higher studies.” he says.
“Now imagine if I panicked in 2008 and sold off my funds. Do you know how much money I would have got in February 2009 for the fund I started in 1994? Only Rs. 31 lakhs, as against Rs. 1.25cr in 2014 when I sold it to fund my child’s higher education” he smiles. “I have learnt one thing in this 26-year old investment journey of mine. Markets will keep going up and down. If you have invested in good funds, let the fund managers worry about managing your money. That’s their job. My job is to ensure that I monitor my investment at regular intervals and rebalance if required and most importantly ensure that my family lives comfortably.”
Mr. Muthuswamy still has four years until retirement. Does he plan to continue his investments? “Of course, but with lower equity allocation as I am closer to my goal and don’t want to let volatility impact my accumulated corpus,” he signs off.
Disclaimer:
Kindly note that C. Muthuswamy is a fictional character used only for representation purpose. The example given above is for the purpose for depicting long term benefit of investing in mutual funds through SIP. Mutual fund investments are subject to market risks.
The calculator is only an illustration, to demonstrate the concept of compounding and should not be constructed as a promise, guarantee or a forecast of any minimum returns or future returns. Kotak Mahindra Bank does not assure any safeguard of capital and investments through SIP, does not guarantee or assure any protection against loses. #Mutual Funds are subject to market risk. Please read all scheme related documents carefully before investing. Past performance may or may not be sustained in the future. This Article is for information purpose only and should not be construed to be investment advice under SEBI (Investment Advisory) Regulations. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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