Mutual fund verses Direct stocks

 *Forward post from vijai mantri*

Direct Stocks versus Mutual Funds!

First how do you get multi-baggers without the possibility of permanent loss of capital!  

Yes you can by investing in equity MFs. In Indian equity markets, money doubled every 4.5 years. For the purpose of simplicity let’s assume money doubled in every 5 years. At this rate of growth let’s say how many times your wealth could have grown.

Years Growth of wealth 

5 years 2 times 

10 years 4 times 

15 years 8 times 

20 years 16 times 

25 years 32 times 

30 years 64 times 

35 years 128 times 

40 years 256 times 

45 years 512 times 

50 years 1024 times 

Yes with intermittent volatility! 

Now look at the performance of direct stocks!

Performance from 2016-2021 (5 Years) 

Large Cap Stocks (100 stocks)

- 74 stocks delivered 12% CAGR

- 25 stocks delivered zero returns 

- 1 stock delivered negative returns 

Compare this with LC equity MFs.

- Worst Fund 11% CAGR

- Category Average 16% CAGR

- Best Fund 20% CAGR

MId cap stocks (150 stocks)

- 77 stocks delivered 16% CAGR

- 61 stocks delivered 10% CAGR

- 12 stocks delivered negative return

Now look at performance of mid cap funds 

- Worst Fund 13% CAGR

- Category Average 17% CAGR

- Best Fund 24% CAGR   

Small cap stocks (2680 stocks)

- 1 stock delivery 93% CAGR

- 20 stocks delivered 46% CAGR

- 2651 stocks delivered 2% CAGR

99% of all the small cap stocks delivered just 2% CAGR. So much so for multi- baggers in small caps!!

Performance of small cap funds 

- Worst Fund 14% CAGR

- Category Average 20% CAGR

- Best Fund 25% CAGR

Mint Report 

Mint looked at direct stock returns from Jan 2002 till Jan 2022. 

- Out of 600 stocks around 1/3rd stocks delivered 20% CAGR generating 87 times wealth. 

How much MFs have done in this period. 

- Worst Fund 12%CAGR 11 times

- Worst 3 Fund 13% CAGR 13 times

- Worst 5 Fund 14% CAGR 14 times 

- Nifty Fund 15.5%CAGR 18 times 

- Avg Fund 19% CAGR 36 times 

- Best Fund 26.8%CAGR 100 times 

25 years (1996-2021)

-Worst Fund 12% CAGR 17 times 

-Worst 3 Fund 13% CAGR 20 times 

-Worst 5 Fund 14% CAGR 26 times 

- Cat Avg 19% CAGR 74 times 

-Best Fund 25.8%CAGR 300 times

(HDFC TAX SAVER FUND)

https://slfinancial.fundexpert.net/