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Business News/ Money / Personal Finance/  Mirae Asset offers 2 key takeaways for investors following a 15-year journey; check details
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Mirae Asset offers 2 key takeaways for investors following a 15-year journey; check details

According to Gaurav Misra, Co-Head Equity having a long investment horizon and not to time the market have been the two most important learnings over the last 15 years.

Mirae Asset : As of March 31,2023, the AMC is managing AUM totaling Rs 1,16,311 crore over 5.69 million folios and has a Rs 860 crore monthly systematic investment plan (SIP) book.Premium
Mirae Asset : As of March 31,2023, the AMC is managing AUM totaling Rs 1,16,311 crore over 5.69 million folios and has a Rs 860 crore monthly systematic investment plan (SIP) book.

Mirae Asset Investment Managers (India) Pvt Ltd (AMC) and one of its flagship funds, Mirae Asset Large Cap Fund, reached the 15-year mark this year.

One of India's top 10 fund houses in terms of assets under management (AUM), Mirae Asset Investment Managers has established a strong presence in the mutual fund industry and has become one of the fastest growing fund houses in the country.

As of March 31,2023, the AMC is managing AUM totaling Rs 1,16,311 crore over 5.69 million folios and has a Rs 860 crore monthly systematic investment plan (SIP) book.

Recently, Gaurav Misra, Co-Head Equity at a press conference, extensively spoke about two key lessons learned over the last last 15 years working with their fund at Mirae.

Have a long investment horizon

It is often advised to investors to have a long investment horizon since over time, equity market volatility will usually become less of an issue and one will start to see adequate returns. This demonstrates the daily returns in the scheme over the previous ten years.

And it is obvious that the scheme's volatility will be high when only one year is considered, but as time goes on, the volatility begins to decrease.

It is therefore recommended to have an appropriate longer time horizon for equity as an asset class. Otherwise, if one's horizons are limited, there is always a potential that they would make poor decisions, which can be mostly impacted by fear or other emotions. And so when one is coming into equities, it's better to have not only a long horizon and stick with that. So the discipline of staying there.

Gaurav used an internal example to convey his point and explained the power of compounding.

Spread of Return
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Spread of Return

According to him, if one has come in a one-year time frame, then one can even have some percentage of time or returns. In this above case, 17% is the returns, which is less than 0% on a one-year.

"For instance, if you came in 2019, first half, and then you had Covid, it would be evident that your investment's returns would fall into this orange bar, or the negative zone, here. However, as you increase the time period that you hold the investments for—say, from one year to five or ten—the negative returns tend to even out and the power of compounding, carefully chosen stocks, and thoughtful portfolio construction begin to show.

So if you begin to see results that are satisfactory—I'm talking about at least ten to twelve and twelve to fifteen percent buckets—you start to predominate," said Misra.

Avoid trying to time the market

The second is not to attempt to time the market, in Gaurav's opinion. He cited a few situations in the last 15 years, the most recent being the Covid and Ukraine war last year, where an investor may have decided to temporarily halt his net asset value (NAV) or SIP when fear became more and more prevalent. What happens to the outcome?

According to him, the investor's 18 lakh investment would have multiplied to 61 lakhs if they had remained from the beginning till this March 10, 2023.

But for those four periods of time when fear was a bit overwhelming, and where investors stopped their SIP, the returns would have moderated. So the returns from 61 lakhs would have moderated to just about 43 lakhs. The savings by not investing for those few months would have been just about 4 lakhs. So instead of a total investment about amount of 18 lakhs the investment amount would have been 14, but the returns the outcome would have been much less satisfactory from 61 to 42.

"So this was the second take away. The need to not kind of time the markets too much in this category and to benefit therefore from the power of compounding. But here, you know, there are two decisions one has to make very correctly, which is you have to try to have to exit at the right time, and then you have to enter in the right time," said Gaurav.

 

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We explain why timing the stock market is not a good idea.
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We explain why timing the stock market is not a good idea.

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Published: 14 Apr 2023, 10:12 AM IST
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