Analysis: My Mutual Fund Investing Journey

Published on / By M. Pattabiraman Twitter: @pattufreefincal / 19 Comments

Published: February 14, 2016 at 8:46 am

Last Updated on February 14, 2016 at 12:31 pm

This is an analysis of my mutual fund investing journey in particular, the growth of my retirement corpus.  The aim of this post is only to share my insights. The main reason I did this analysis is to explore the possibility of creating a tool to automate this analysis.

My first ever equity investment was on 19th June 2008. The markets were about to crash, but I had no idea about all that simply because I was not looking.

my-mutual-fund-portfolio-1

The blue line is my normalized retirement corpus (equity portion alone). Starting from a value of ‘1’ on 19th June 2008, it is currently now ‘1830’.

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Since I had extremely small amounts of equity exposure up to early 2010, the recovery from the 2008 crash did very little to bolster my folio.

When you look at the data as shown above, plotted with BSE 500, it gives the impression that the folio has almost been immune to market movements and has gone up regardless!

The devil lies in the details!

my-mutual-fund-portfolio-2

This is my total investments plotted along with the corpus. My investment was ‘1’ on 19th June 2008 and has increased to ‘1429’.

So much of the corpus growth has been due to investments which shot up rapidly in 2010.

my-mutual-fund-portfolio-3

Now gain or loss has been added. Notice that the folio was in red for more than 5Y after I started investing. The gains started only in Aug 2013 when the market started to move up.

The net XIRR of this folio is 11.1% (12 Feb 2016).

Personally, I am at peace with this. All I have done is to put away money into the market each month. Close to 8 years of doing this has taken me to within 7-8 years of (notional) financial freedom: Retirement Planning: My Story So Far

So I see no reason to do anything different. Freefincal tools have helped me understand risk more than anything else.

my-mutual-fund-portfolio-4

My takeaways from this journey:

  • Market returns are highly irregular. The corpus gain shot up from zero to 600 in a little more than a year.
  • The main reason for this gain: systematic increase of capital in the market during the lean period. To me, this is the secret  behind wealth creation with systematic investing.
  • Keep your head down, ignore the noise and constantly deploy money into the markets.
  • All the gains made so far can evaporate in this ‘crash’. However, that is because of NAV movement, not because of decrease in mutual fund units.
  • My technical retirement is 24 years away. So even if I do miss my 7/8Y target, I do not mind too much.
  • People talk about a poor show in 2016 and then markets picking up. If that is true (rarely is), then I don’t think my target will be affected.

The main reason I write this is to illustrate the point that one has to wait patiently for gains to arrive. Some say it is ‘stupid’ to do this – active management is essential.

I believe active management is essential too. I have actively analysed my portfolio and I have made an active choice that my dull and boring systematic monthly investments are going to continue.