Does compounding work in Mutual Funds?
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- Опубликовано: 21 авг 2024
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Can you revisit the question and remake this video? Assuming the question in the title was indeed answered, it is rambling and lost in the roundabout way it was answered
Videos start at 07:03
The concept of Compounding is the returns generated adds up to the overall amount and as a result returns are increased.
But given a SIP (MF) it can go backwards as well. As there are no returns added to the Units you hold.
So your units remain same number irrespective of whatever the Unit price is.
So Compounding doesn't work here.
-Correct me if I'm wrong.
My assumption is , market is volatile , so what ever units you get , they will be there , but the price of them will decreases or increase if it is going good , but still compounding works for return percent at that year
No you are correct. I always believed MFs compounded money mostly due to SIP calculators, but always was not very clear about it. But after i watched Pattu from freefincal's video, it became clear that it's not actually getting compounded.
Its surprising that industry expert like Dhiren is getting this wrong.
@@kitten_with_bad_breathplease share the link
@@kashifshaikh9432 its actually very simple. Suppose you invest 1L at nifty 25000. In say 5 years nifty reaches 30K. Your money grew with the nifty as your MF units had gain. But next year nifty crashes and is back at 25k so you are back to your 1L. So you lost all your gains.
This can never happen in an FD where compounding actually happens.
Most people in the comment section failed to get the crux of compounding. They couldn't figure out the difference between "compound interest" and "compounding".
Video was about the does compounding works in Mutual Funds and this guy kept sharing view on Maruti plants.
And Monika Halan promoting this platform in her books😂.
@@sanjayshorey4225sabke sab mile hue h 😂
It's unbelievable how a person who is apparently a leader in this field is going so horribly wrong in the basic concept of compounding. This video was excruciating to watch...
😅😅 please do explain
Here compounding concept is notional. It may be positive or negative. Just to compare and gauge the performance of equity asset class against fixed compounded products. The problem is when compounding is marketed as real compounding to promote mutual fund. Please admit there are lot of misselling and propaganda have been used by mf promoters. That is the main point of argument.
Your video actually just goes on to explain exactly why there IS no compounding benefit in equities. Most of the returns one would have gotten if one invested in a sensex fund from 1979 till 2022 would have come from 5 or 6 good years with super normal returns. If one were to be out of the markets during those bull years, then the final corpus would have been much lower. Investing in equities as per a sound asset allocation strategy only increases ones odds of beating inflation in the long term. That's all...nothing more, nothing less
This logic applies to every asset class. Remove those good years and you'll find real estate and gold returns are just 3-4%
@@WalterWhite-og6wjthat's why maintaining asset allocation is paramount!
This entire explanation is misleading. Till the time MF performance is based on NAV, there is no logic of compounding. The growth is purely on market forces and it can go negative any time. Compound interest never goes negative 😊. Sir i have deep respect for your views but please share the truth.😢
Unless they are giving me more units from the reinvested amount, it's a bubble based on NAV which can burst anytime. These companies are fooling people by showcasing compounding. Actually they are getting rich with our commission
If mutual funds fall by 50% in a year, next year it has to rise by 100% to get even with 2 years of no returns. How does that translate to compunding?
Are you serious with your question? 😅
@@sudheerk67 😆😆😆😆😆😆
In compounding you never look back. But, it is not so with MFs. The growth , narrated, is obvious result of growing economy of the country.
Had it been compounded growth, two investers , investing at two different time , after same time span SHOULD HAVE BEEN EQUALY BENEFITTED. But, unfortunately , it is not so. This " componding magic" is simply MF marketing gimmick.
Sir, I have been watching to your videos since 2017 and I have a request! Please help me understand how was investing Rs. 10,000 in sensex possible in 1979?
No one in middle class could save Rs. 10,000 in 1979. This had much more value if adjusted for inflation. (About Rs. 2lac+). In 1979 my father was a branch officer of a public bank in Moradabad, earning a monthly, 3 figure salary! Access to BSE from there was impossible. Was there a financial product that enabled consumers to buy sensex? Average bank FD rate in 1979 was raised to 17.6%. The inflation ridden economy was running on the socialist model with no major reforms until 12 yrs later. Something no one had anticipated back then!
So, please give example from the time when a disposable income of Rs. 10,000 was possible, stocks & mf were no longer physical certificates, bank fd rates no longer attracted the consumer, value research of stocks was mature enough & the stock market was equally accessible to a billionaire stock trader in Mumbai as it was to a sarkari bank officer in moradabad!
These youtube influencers always give stereotypical examples based on best case scenarios.
Excellent analysis. If I had 10000 in 1979. And every year since. I would have bought acres of land. The value of which would be much more than 3 crore now. 😂
Compounding is not to do with the starting value of the disposable investment but the rate of compounding over the long term. You are missing the forest for the trees. You could not invested more than you could have saved but whatever you could save would have grown at a faster rate over time.
Compounding in mutual fund is a hindsight and not a foresight
Very aptly put!
Great fruits come after 20 years and further longer term
PLEASE IMPROVE AUDIO & VIDEO QUALITY 🙏
Compounding does not work in mutual funds
So it's compounding of business equity and not SIP amount..
Not convinced at all... It's not compounding...
Invest for 1 year in MF get out of it. Reinvest in same or different mutual fund with maturity amount from previous fund. That is compounding else there won't be any compounding.
Instead of mentioning as compounding and its concepts… just saying how markets have done well over 40+ years would have made sense… this is not based on the compound interest principle
No compounding effect should be there when market will fall but in case of FD the compounding effect will continue.
Lol
About 18 years ago I invested 5k in Birla Sun Life mf on someones advice....knew nothing about mf back then....that fund did badly.... forgot about the money....then after 9 years when I remembered and redeemed that fund I received only 4700..... that's when I learnt that mf's do not compound.....moral of the story.....when the market is really high and your mf is earning more than 25-35 percent profit, start booking PARTIAL profits and reinvest it. That's how you create wealth....but no one tells you this. I don't know why??
They do tell you. You need to follow "them". Like freefincal.
There is no compounding in mutual funds. U also could not explain it.
Read his article on VRO also, here the point is not to prove that since compounding formula does not apply to MF, compounding does not happen. Basic philosophy behind MFs is that growth begets growth. Moreover, since MFs are inherently volatile, we cannot apply compunding formula rather, there is XIRR, CAGR etc to calculate yearly returns.
Why do you say so? Can you explain?
@@animeshshukla5387 but this wasn’t articulated well in this video… maybe in the article he has done
Well THis is NOT Compounding you cannot Define Companys growth, expansion, more units into Compunding. compunding is when i get interest on my units each quaterly or annually, which Fund house will never do>, when their Nav goes from 0 to lets say 500, thats the growth over the period of time and patience, thats what we get, and Correct urself, its not COMPOUNDING!
Which fund can invers how to do it
One can make good money in long term in MF but you will not creat wealth/fortune unless you do step-up SIP. This is due to inflation factor not accounted in the above video.
Wow .. this knowledge u provided was a gaand opener for me .. I think u deserve a noble price for mathematics for this .. 💩 saala ..
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what is best MF for one year time horizon? thanks in advance
Dear, I already hold a folio number with a mutual fund AMC. I want to invest in a new mutual fund of the same AMC. Will I have to resubmit all documents, which I did, during my 1st mutual fund? Kindly guide.
No.
Just start contributing to the new fund under the same folio number
Thank you sir, great explanation.
The negative comments in this video is mind-boggling :)
Very apt .. analysis and information 👌
Compounding = increase without work
Growth = effortfully trying to get that extra penny....
How simply undermined the hardwork by just calling it compounding.....
Is compund intreste works in MF
There's a difference between compound interest and compounding.
Most gains of compounding in Mutual funds get eaten away by the high fees of Mutual funds and taxes. add Manager errors.
Btw the cagr they show is post fees.
That's why invest in index ☝️
No proper knowledge received from this video
Value Research === DD National (poor qualities)
Please.speak in Hindi Hindi Hindi to under the subject properly.
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