There are 80% chances that an investor would earn more than 12% CAGR in 20 years if he opts for SIP in a passive fund that tracks Sensex, shows a study by DSP MF. The research takes into account the rolling returns of BSE Sensex since its inception i.e. 3rd April 1979 till June 30 this year.
Founder of Prudent Wealth, Chandan Ghosh, who has further analysed the data shared with Cafemutual that the chances of earning negative returns decreases with every passing year. Meanwhile the odds of earning over 12% CAGR increase with time.
For instance, the chances of earning negative returns is nil after 15 years of investment while the chances of earning double digit returns is more than 75%.
|
SIP Tenure |
% of times returns are |
|||
|
Negative |
Between 0-8% |
Between 8-12% |
> 12% |
|
|
1 year |
29% |
12% |
5% |
54% |
|
2 year |
23% |
13% |
9% |
54% |
|
3 year |
15% |
19% |
13% |
53% |
|
5 year |
9% |
17% |
20% |
53% |
|
7 year |
8% |
15% |
21% |
56% |
|
10 year |
6% |
9% |
25% |
61% |
|
12 year |
1% |
12% |
23% |
64% |
|
15 year |
0% |
5% |
21% |
74% |
|
20 year |
0% |
0% |
20% |
80% |
Source - DSP and Prudent Wealth
A similar research published in PMSKart newsletter earlier this year had shown that there is more than 70% probability that an investor will get more than 12% return from SIP in an active equity fund. Click here to read more.This research shows that the odds of 12% CAGR in 10 years stand at more than 60%.
Earlier, in September 2019, CRISIL and AMFI report showed that the chances of getting negative returns from investments in mutual funds through SIP route diminishes to nil from fifth year onwards.
The report has taken the past 15 year data ending on June 2019. According to the report, the instances of negative returns declined with the increase in investment horizon.
While the instances of getting negative returns were 25% if holding period is up to 1 year as on June 2019, such probability reduces to 17% and 8% for 2 year and 3 year SIPs respectively. Further, chances of getting negative returns reduces to 5% if holding period is 4 years. From fifth year onwards, there was zero percent chance of getting negative returns from SIPs, said the report.
