The BSE Senxex has notched up a 134% increase from the lows it hit in March last year. Riding the market rally, many mutual fund investors have become far richer now. Now, the market has pared some gains, some investors feel they didn’t redeem at the right time.
Investors have always faced this dilemma of when to exit, especially so when the benchmark indices achieve new highs. Investing in lows and exiting in highs have the investment mantra for many. The Mint in an analysis, however, says those who redeemed would have earned much higher returns if they had held investments.
Citing the gains made by Quant Small Cap fund and Kotak Small Cap fund, the Mint reports said when the Sensex was at 25,981 on 27 March 2020, the NAVs for Quant Small Cap and Kotak Small Cap fund were Rs 30.15, Rs 50.07 respectively.
Now, as the Sensex touched 40,509 on 9 October 2020, the NAV for Quant Small Cap was Rs 62.05 and for Kotak Small Cap fund, it was Rs 88.23.
For an investment of Rs 1 lakh on each of the funds on 27 March 2020, the investor would have earned a total corpus of Rs 2.05 lakh (Quant Small Cap) and Rs 1.76 lakh (Kotak Small Cap fund) when the Sensex touched 40,509 on 9 October 2020.
But the same investment on September 24, this year, when the Sensex reached 60,048, would have grown to Rs 4.38 lakh and Rs 3.55 lakh, respectively, with Quant Small Cap’s NAV reaching Rs 132.26 and Kotak Small Cap fund’s NAV touching Rs 177.94, according to the Mint report.
The NAVs for Quant Small Cap and Kotak Small Cap funds were Rs 30.15 and Rs 50.07, respectively, while the Sensex was at 25,981 on March 27, 2020. The NAV for Quant Small Cap fund was Rs 62.05 and for Kotak Small Cap fund was Rs 88.23 as the Sensex reached 40,509 on October 9, 2020
When compared to the time Sensex crossed 60,000 points, If the investor had exited when Sensex breached 40,000, he would have actually lost Rs 2.33 lakh on Quant Small Cap’s investment and Rs 1.79 lakh on Kotak Small Cap fund’s investment, compared to the gains the investor would make when Sensex crossed 60,048 in September this year.
The report quoted Arijit Sen, a SEBI -registered investment adviser and co-founder of merrymind.in, as saying that when an investor wants to redeem, he should ask himself why he needs to sell it. “And then, after selling it, what does he want to do with it? Where does he want to park the money? etc.”
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