Wednesday, Jun 07, 2023

Want Rs 10 Crore At 60? Invest Rs 8,416 Per Month For 40 Years, Says Report

Outlook Money

Want Rs 10 Crore At 60? Invest Rs 8,416 Per Month For 40 Years, Says Report

Indian equities have fared well despite numerous intermittent crisis events. Even people who have invested before a market crash have gained in the long run, says FundsIndia report

A 20-year-old will need to invest Rs 8,416 per month in a mutual fund scheme at 12 per cent compounded annualised growth rate (CAGR) to accumulate Rs 10 crore by the time he turns 60. A 25-year-old and a 30-year-old will, however, need to invest Rs 15,396 and Rs. 28,329 per month, respectively, to accumulate the same corpus. 

These findings appear in a report titled ‘Wealth Conversations December 2022’ by FundsIndia, a Securities and Exchange Board of India (Sebi ) registered investment analyst. 

The report says that the 20-year annualised return of Nasdaq 100 total return index (TRI) was 16.6 per cent CAGR, while for Nifty 50 TRI, it was 17.1 per cent CAGR. 

According to the report, in essence, the investment amount required by a 30-year old to accumulate Rs 10 crore is more than three times the amount required by a 20 year old. 

The report also cites many other trends. Here are some of the other equity mutual fund investing trends observed in the report. 

Sensex Traded Below Peak Level For About 51% Of The Days Since April 1979 

According to the report, Bombay Stock Exchange’s 30 share Sensex traded at levels of about 10 per cent below its peak for about 51 per cent of its trading days since April 1979. For 29 per cent of the days, Sensex traded at about 20 per cent below its peak, the report adds. 

Historically, temporary market declines of 30-60 per cent occurred once every 7-10 years, the report further says. 

The biggest fall in the value of the Sensex (61 per cent) occurred in 2008. It took about one year and eight months to recover back to the peak levels. Incidentally, the fall itself took one year and two months. So, in total, it took two years and 10 months for the market to go through the entire cycle of the fall and the subsequent recovery. 

In comparison, the market-wide sell-off in 2020, which led to the Sensex falling by about 38 per cent from its peak, took just 10 months, including two for the fall, and another eight months for the recovery. 

Indian Equities Have Fared Well Despite Numerous Intermittent Crisis Events 

About 12 major crisis events have occurred since January 1986, the report says, which resulted in the Indian markets falling significantly. But despite these events, the equity markets have given superior wealth creating returns.  

These include events, such as the Harshad Mehta Scam, Dot Com Bubble Burst, The Global Meltdown of 2008, European Debt Crisis, The Global Market Sell-Off Decline of 2015-16 and the Coronavirus Pandemic of 2020. 

According to the report, from 1980 till 2022, the market upsides were always higher than the downsides.  

Investing Just Before A Marketwide Crash Is Not Something To Curse 

The report adds that people usually tend to curse themselves for investing during market peaks and when the market falls heavily from the peak levels, they feel a sense of regret. However, data shows that people who invested just before a big market-wide crash still benefited from a decent wealth creating return. 

According to the report, people who invested just before the 2000 Dotcom Bubble crash had to go through a 50 per cent drop in absolute value of their investments, but in the long term, they had earned a 12 per cent return.