Will my Mutual fund Investment losses actually turn into profit in long term?

Are your investments giving you negative returns?

We have been advising you to invest for the long term. There might be short-term losses, but in long run, you are likely to make very good returns.

Some of you asked for proof.

Well, we may have found an answer.

The year 2011 was also like this year. If you had started a SIP of Rs 1000 per month in Jan 2011, then by the end of 2011, you would have made losses. Did those losses continue forever? See the examples of three of the most popular funds.

Example 1: Reliance Small Cap Fund

If you had started a SIP of Rs 1000 per month in Jan 2011, your annual return by Jan 2012 would have been -17.7%, giving you a loss of around 2,200 for an investment of 13,000. Suppose, you overcame the fear of loss and continued the SIP. By Jan 2014, the annual return would have been 19.3%. You still continued. By Jan 2016 and Jan 2018, annual returns would have been a whopping 35.2% and 33.7% respectively. By Jan 2018, an investment of Rs 85,000 would have become Rs 2.77 Lacs.

Example 2: Kotak Standard Multi Cap

Not convinced with just one example? Here’s another one.

A SIP of Rs 1000 per month, started in Jan 2011, would have given a loss of 1500 by Jan 2012. But then by Jan 2014, the annual returns became 13.3%. If you had still continued the SIP, the annual returns would have been 20.4% and 20.5% by Jan 2016 and Jan 2018 respectively.

Just imagine, if you had stopped the SIP by Jan 2012!

Example 3: ICICI Prudential Bluechip

Getting convinced? Still not? Well, here’s another example.

A SIP of Rs 1000 per month, started in Jan 2011, would have given annual returns of -3.3%, +13.9%, +15.5%, +17.2% by Jan 2012, Jan 2014, Jan 2016 and Jan 2018 respectively.

Conclusion

Here, we have taken only three funds as examples. If we do a similar analysis on other funds as well, the story is similar.

And not just for 2011 as SIP start year. 2008 as SIP start year also depicts a similar story.

So, if your mutual fund investments are negative, don’t worry. They are likely to turn positive in long run. Just make sure that your portfolio is well diversified and you have invested in right funds. Schedule a portfolio review with our investment team to make sure that you are invested in right funds.