Wednesday, April 7, 2010

Are Equity Mutual Fund returns comparable with Real Estate investments

"I would rather invest in Real Estate than invest in Mutual Funds"
"Investing in a Flat in Mumbai will fetch me the best return on my investment"
"Markets have given no return in the last 5 years and everyone is buying real estate"

Really??? Think again.....

Consider this situation. I bought an apartment in a Mumbai suburb, Malad in Oct 2002 for Rs.18 Lakh, other costs included Govt duties and brokerage Rs.90,000 and contribution to the Society's repair fund of Rs.49,000. I then did some renovation 3 years later in 2005 spending Rs.2,65,000. The total amount I have put into this apartment being Rs. 22 Lakh.

If I had to invest the same amounts on the same dates in HDFC Equity Fund, a Diversified Equity fund from HDFC Mutual Fund it wouuld look like this...

Oct 2002 - 1800000 - Cost of Flat invested at NAV 20.19 giving 89153.05 Units
Nov 2002 - 90000 - Govt Duties invested at NAV 20.60 giving 4368.93 Units
Oct 2004 - 49000 - Soc Repair Contribution invested NAV 55.41 giving 884.32 Units
May 2005 - 265000 - Renovation invested at NAV 66.95 giving 3958.18 Units

All in all after investing 22 Lakhs I accumulated 98364.47 Units.

To update this --- On 14th Dec 2011 NAV of HDFC Equity was 227.5200 (Markets at a 2 year Low since Jan 2010) and yet my investment would now be valued at 2,23,79,982.57 !!!

If I were to put my flat for sale in the market today I would barely get Rs.1 Crore.
My investment in a mutual fund would have given me TWO & HALF times the return!!!

JULY 2013
Let's update this again... --- On 18th July 2013 NAV of HDFC Equity was 270.2360 (Sensex at 20000 and on the day that the most expensive Real  Deal was cracked in Worli Mumbai) my investment would now be valued at 2,65,81,620 !!! It has grown 10 times !!! in 10 years

Markets are at what the press calls "life time high" BSE Sensewx @ 27000.  The NAV of HDFC Equity is 455.9200 So my Investment would have been worth Rs.4.48 Crores !

My investment of 22 Lakhs made between Oct 2002 and May 2005
was valued at 2.32 Crores in March 2010;
fell to 2.23 Crores in Dec 2011
was 2.65 Crores in July 2013
and 4.48 Crores in Sept 2014

JUNE 2019
Its almost 5 years since our last update lets see how our Investment in Mutual Fund is faring.  At an NAV of 699.9330 on 28th June 2019 the value of our investment would be 6.88 Crores!

Need I say more? DO NOT IGNORE EQUITIES If you want to generate long term wealth