Thanks Mr. Subra for putting it in simple terms.

I dont think nor pointed that you have ever mentioned “long term” less than 7 years. But many well reputed have.

To put it more openly it was dhirendra who did guide many to MF investors in india. But his defenitions and guidance stand questionable for me now. It took over 4 years to clear out 11 out of the 12 funds from the portfolio and rebalance it to what i am more confident of now. it was all from his reccomended ones but their performance in non comparable now. What to do – subra.com started too late… .

@ bharath

The compounding works best if your initial years of investments are returning the best. so the 5 year returns are so pathetic the impact it have on your corpus after say 20 years is HUGE. Also after another 5 years (for the defenition of 10yrs = long enough to look good) if this investment to show a decent 12-15% return the market should be making unprecedented moves in the coming years to lift it from it current 2-5%. Hope you got the point.

i checked the performance over 5 yrs. (bet. dt.1-6-2007 to dt. 31-05-2012 for the mf mentioned in my earlier comments. however here the figures are gain in %age compounded over 5 yrs. period:
bsl div. yield plus- 11.39% ,icicipru discover-10.88%
idfc premier equity-15.17%,
quantum long term eq.-9.72%, icicipru dynamic-7.4%
uti div. yield-10.59% ,hdfc equity-8.39%
templeton india eq.income-6.73%, hdfc top 200-9.26%
sensex-2.77%, nifty 50-2.77%, bse midcap-(-)1.03%
my only take is for laymen, investing in selected diversified equity funds is a good idea.

Volatility is NOT the problem. The fact that you NEED to sell when the market is down is a problem. There is no rule which says ’3 years is long’ or ’7 years is long’. Equity market is not a pet dog on a leash. Take a 7 year rolling return or a GROWTH option SIP it will be very very difficult job to find a period when fixed returns have beaten equities, if at all. Even assuming you can find it, it does not mean anything. The probability of debt beating equity on an SIP basis over 7-10 years is low.

anyway, let me repeat, these are my views. You can do what each one wishes to do…..have fun in the process.

My take is “you need to invest in equities (and enough quantity) ” learnt it in very bad/hard way…..

yours too is a one sided story. Check 5 year returns of the same (lumpsum or sip) which will give you a different story. Most of the equity advisors have rewritten the “defenition of long term” from minimum 3yrs to 5 years and currently Advising 7-10…. . Hope their customers too have the patience.

I am more than happy if the FD(or tax free intruments) is atleast beating the inflation.
I am more than happy if my real estate is returning 2-3% compunded over inflation (have locked for min 5-10 yr)
I will be really excited if my inverment in market is returning 5-6% compounded over inflation

Last year the inflation was 10% and the best fixed income products were returning less than that.

The problem i feel is i consider to be in the lucky 1% to know/ learned “something” about investing. But the 99% countrymen dosent. Moreover the government nor the regulators seems least interested in creating simple products and simple rules for people to believe in these basic principles of investing and financial planning.

Mrhdk…. “Buffet kaa baap”…. What a strike -out of the biggest stadium. . Have a great day.

i think, common sense , says the equity as a class of assets beats inflation (is capable to give a positive return over inflation) over a period of time. because businesses are for profit making (whether doing or not, is different matter) and they are adding values of their products or services. for Indian environment , for laymen, instead direct equity, selected diversified equity mutual funds could be better. studying my portfolio (of diversified equity mfs) i found following performance between dt.1-07-2009 to dt.29-05-2012:(all gains in absolute % )

bsl div. yield plus- 54% ,icicipru discover-72.66%
idfc premier equity-64.68%,
quantum long term eq.-52.85%, icicipru dynamic-44.94
uti div. yield-42.15% ,hdfc equity-40.27%
templeton india eq.income-36.13%, hdfc top 200-29.91%
sensex-12.24%, nifty 50-15.19%, nifty midcap-29.54%

my point is that during about 3 yrs’ period of stock market volatility , the above funds gave better than fd return , though the indices could not perform. it is for patience and faith in your beliefs, i think.