Some Amazing Numbers

Recently I came across some amazing, but not unexpected numbers! Verily has it been said that to build wealth systematically, you must subscribe to the Systmatic Investment Plans (SIPs) of the top performing mutual funds. Its no secret that on a ten year scale covering period up to 30th November 2010, the Sensex has given compounded annual returns of 18.40 % and Nifty returns for the same period have been 17.80 %. It does not require great mathematics to calculate that each Rupee invested by you ten years ago would have become at least 5.14 Rupees, in either indices. Should you therefore invest 'passively' in imaginary products called 'Sensex' or 'Nifty' or do better options exist?

This is where I came across some calculations done by a Mutual Fund Distributor and the calculations are attractive. He has analysed the performance of the following funds.
HDFC Top 200, HDFC Equity, Fidelity Equity, DSPBR Top 100, DSPBR Opportunity, Reliance Vision, Franklin India Prima Plus, Franklin India Blue Chip, Reliance Equity Opportunity, ICICI Prudential Dynamic and Birla Frontline Equity. The reasons for choice of these funds are not given, but the choice is good, since ten out of these eleven funds are either 5 star rated or 4 star rated. (Refer the latest issue of 'Mutual Fund Insight', which I call the Bible of Mutual Fund Investors - more about this great magazine some other time). This Fund Distributor has calculated the returns from these funds, presuming you had started an SIP in each one of them, by investng monthly an amount of Rupees 2000 for the period from 1st April 2005 till 1st November 2010, i.e. a period of 68 months. He has given the maturity value as of now and there are no surprises as these eleven funds have given an average compounded annual return of 23.81 %, and the top of the chart being occupied by HDFC Equity Fund with returns of 28.39 %!
For your reference, I am giving below the top 5 names out of these funds for this period.

1. HDFC Equity Fund 28.39%
2. HDFC Top 200 Fund 27.10%
3. Reliance Equity Opportunity Fund 26.34%
4. Birla Frontline Equity Fund 24.29%
5. DSPBR Top 100 Fund 23.07%

Even the last of these eleven funds (Reliance Vision Fund), has grown into an amount of Rs.244744 starting with your total investment of Rs.136000 (68 months, 2000 per month), whereas the best i.e. HDFC Equity Fund has grown into Rs.298950.

Happy investing!! If I do not write before X'mas, I wish you a very happy X'mas and happier New Year 2011!!

Madhusudan Sohani

mdsohani@hotmail.com