You can read more about the fund and its sponsor in Great Days at BlackRock. Although this category lost money in the first half of , returns for the previous six months were so strong that the one-year numbers rock. Manager Gonzalo Pangaro favors Brazil and China because those countries have healthy fiscal and trade balances. The fund should have been the top performer based on one-year returns among diversified emerging-markets funds. Funds that invest in Russia, India and China dominate the charts in this category.
By investing in dividend payers, the fund limits itself to higher-quality companies, which hold up better in a rout. Over the long term, European stocks have been rewarding. You might be surprised to see so many real estate funds topping the charts in this category. But remember, many real estate stocks were priced for disaster when the market bottomed in March , so they had plenty of room to run over the past year.
Most gold funds, such as Tocqueville Gold TGLDX , hold only a small portion of assets in metal; instead, they invest mostly in gold-mining stocks. Mining stocks are almost always more volatile than bullion, so expect a turbulent ride if you invest in a gold fund. This group includes things outside the traditional categories of stocks, bonds and cash. It profits as a deal stock rises from the post-announcement price to the consummation price.
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Which tax rate applies to your long-term capital gains will depend on your taxable income. Rolling returns means that you look at the returns between different sets of dates and take an average. For example, the returns between 1 January and 1 January , between 1 February and 1 February , and so on to get a monthly rolling returns for a year holding period. We did such an analysis for the Nifty from to and found that while on average year returns come to The findings show that entering at expensive valuations hits you hard even if you stay invested for a decade.
This has some lessons for today with the rebound bringing the market back into expensive territory. It is difficult to predict how profits of corporate India would grow in the next 10 years," said Parekh.
But he qualified his observations by looking at different market segments. Yet another way of protecting yourself from unlucky dates is investing through a systematic investment plan SIP. It invests a fixed amount every month, which averages out the purchase price. Would an SIP have protected you from the unlucky returns of the period?
Unfortunately not. A year SIP return on a large Nifty exchange-traded fund was a mere 7. A final argument that mutual fund experts present is picking a good fund. Although several funds have beaten the benchmark index for most of the decade, on average active funds have been losing their mojo. The asset weighted returns of such small- and mid-cap funds was also higher at So why was the period so very unlucky?
There was a lot of over-investment in infrastructure projects at the start of the decade and many of them yielded negative returns. A lot of money was syphoned off from banks and that also ate into equity returns," said Vikas Gupta, founder, Omniscience Capital, a Sebi-registered investment adviser.
Hence, most of the growth came from multiples expansion, meaning that it mattered a great deal what your starting PE multiple was. Multiples expansion happens when the market pays more for the same earnings, which can be driven by global central banks liquidity or unfounded optimism about the future.
Ravi Saraogi, co-founder, Samasthiti Advisors, puts it down to simple maturing of the Indian economy. As the absolute size of economies grow, growth moderates, which reflects in equity returns. But within this declining trend, they are mean reverting. So chances are that an exceptionally bad decade will be followed by a more bullish decade with higher equity returns," he said.
Gupta is also more optimistic about the future. Do not look at PE ratio, which may be driven higher by a narrow set of stocks," he said. Equity returns broadly will be inflation rate plus risk free return plus risk premium, he added. The decade gone by began after one big financial crisis and ended with another large financial and economic crisis. Investors should pay close attention to the valuations at which they are buying stocks.
Diversification into bonds and gold will also shield the portfolio from this kind of disappointment.
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