Nothing has changed in the stock market since it emerged. Its oscillating movements continue sending even the most veteran traders and investors into a tizzy. New investors who had entered the market when it was at a high are now getting a taste of volatility. So much so, that the ever-changing nature of the market has now caused many of them to refer to historical data to divert their minds from the constantly raging bloodbath.
The market will change its behaviour. This means that you must get used to its wild swings. This is not difficult if you are aware of your investments and financial goals. If you have invested after considerable research, there must be no reason for you to panic. Also, a lot depends on how long you wish to stay invested.
The initial years in the stock market may be tough. The journey to your much-desired corpus entails a lot of ups and downs. Success is possible only with persistence and patience. Continue investing regularly, irrespective of which direction the market sways. Stay invested in the market unbiased of the chaos and noise around you.
Take, for example, you start investing in an index fund. Parking money in an index plan helps, especially, for those unable to choose between different funds of varying market capitalization. Past returns are not indicative of returns in the future. However, comparing funds based on their returns becomes easy for first-time investors looking to park their money in mutual funds.
Based on five-year returns, the top five index funds include
|Name of the fund||Five-year returns|
|HDFC Index Fund - S&P BSE Sensex Plan||13.58%|
|LIC MF S&P BSE Sensex Index Fund||13.26%|
|IDFC Nifty 50 Index Fund||12.70%|
|Nippon India Index Fund - Direct Plan - Nifty 50 Plan||12.41%|
|ICICI Prudential Nifty 50 Index Fund||12.39%|
What if the money is invested for more than a decade, say 20-30 years? The following table shows an estimate of the return one can earn by just staying invested in these funds for the coming 20-30 years.
|Name of the index fund||Monthly investments through SIPs||Five-year returns|
|HDFC Index Fund - S&P BSE Sensex Plan||₹10,000||13.58%||20||₹1,24,13,592|
|LIC MF S&P BSE Sensex Index Fund||₹10,000||13.26%||20||₹1,18,74,194|
|IDFC Nifty 50 Index Fund||₹10,000||12.70%||20||₹1,09,92,183|
|Nippon India Index Fund - Direct Plan - Nifty 50 Plan||₹10,000||12.41%||20||₹1,05,64,505|
|ICICI Prudential Nifty 50 Index Fund||₹10,000||12.39%||20||₹1,05,35,708|
Going forward, some start putting their money in large-cap mutual funds. These funds invest in stocks of large-cap companies, thus, assuming greater stability. This is because these stocks make up most of the equity market, and, therefore, carry much weight in the portfolios of some of the biggest investors in the market. Large-cap fund returns not only beat inflation but also help to accumulate a formidable corpus in the long run. This explains why many investors include large-cap funds in their retirement portfolios.
A comparison of returns of the large-cap funds available for investments reveals the following top five in terms of performance. Since performance is mostly measured in returns, the funds are mentioned alongside their five-year returns in the following table.
|Name of the large-cap fund||Five-year returns|
|Kotak Bluechip Fund||13.03%|
|Edelweiss Large Cap Fund||12.84%|
|Baroda BNP Paribas Large Cap Fund||12.81%|
|Mirae Asset Large Cap Fund||12.42%|
|IDBI India Top 100 Equity Fund||12.23%|
Large-cap funds have helped many investors garner an enviable corpus that helped them survive the years post-retirement. With money losing its value every day due to inflation, it is imperative that investors invest in at least one large-cap fund to usher in stability while accumulating the much-needed corpus amount.
|Name of the large-cap fund||Monthly investments through SIPs||Five-year returns|
|Kotak Bluechip Fund||₹10,000||13.03%||20||₹1,15,02,683|
|Edelweiss Large Cap Fund||₹10,000||12.84%||20||₹1,12,05,588|
|Baroda BNP Paribas Large Cap Fund||₹10,000||12.81%||20||₹1,11,59,470|
|Mirae Asset Large Cap Fund||₹10,000||12.42%||20||₹1,05,78,937|
|IDBI India Top 100 Equity Fund||₹10,000||12.23%||20||₹1,03,08,486|
And, then there are mid-cap and small-cap funds containing stocks of mid and small capitalization, respectively. Investing in these funds entails a lot of risk in the short run. However, in the long run, investors benefit from averaging out the losses with subsequent gains too.
The following table lists some popular mid-cap and small-cap funds along with five-year returns, respectively.
An estimate of how these funds would perform in the next 20 years based on the available five-years returns data reveals
|Name of the mid-cap fund|
|Name of the small-cap fund||Five-year returns|
|Quant Mid Cap Fund||10,000||20||21.38%||3,90,14,312||Canara Robeco Small Cap Fund||22.64%||4,73,87,727|
|PGIM India Midcap Opportunities Fund||10,000||20||20.30%||3,30,85,5482||Axis Small Cap Fund||20.82%||3,58,10,529|
|Axis Midcap Fund||10,000||20||17.91%||2,31,24,9561||Kotak Small Cap Fund||18.38%||2,47,93,747|
|Motilal Oswal Midcap Fund||10,000||20||16.79%||1,96,18,4081||Union Small Cap Fund||15.96%||1,73,93,972|
|Edelweiss Mid Cap Fund||10,000||20||16.08%||1,76,97,798||HDFC Small Cap Fund||15.17%||1,55,31,057|
Wealth is not created in a day or a year. It takes time to earn money. Money begets money; wealth attracts wealth. This means that we must remain steadfast with our investments over the period to ensure that we have enough corpus to thrive.
There is so much euphoria in the market one year, and then suddenly everything changes in the following months. This may be due to any unforeseen reason, for example, geopolitical issues leading to war between countries, a short supply of necessary resources or the sudden onset of a recession. The reasons may be many and myriad, though none of them is enough to justify your intent or tendency to stop or pause your investments midway. Staying invested in the market is the only way to create wealth.