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Keep rational return expectation from your investment

Shashikant Singh
/ Categories: Mutual Fund
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Keep rational return expectation from your investment

The riches are in the niches and most of us have a deep-rooted desire to be a part of this niche. Getting rich by investing in equity, among others, remains one of the best ways.

Nonetheless, investors should always have a rational return expectation from the investment and should avoid chasing big numbers. Short-term market noise can lead you to have an exaggerated or underestimated return expectation. However, in the long-run, it will revert to mean and hence, short-term movement should not be your return expectation.

For example, if you want to have a corpus of Rs 1 crore, you need to invest Rs 10,000 every month in Public Provident Fund (PPF) for the next 27 years and three months, assuming it gives you 7.1 per cent return. Similarly, if you are investing in National Pension Scheme (NPS) and getting a return of 10 per cent, you need to invest for 22.35 years to get Rs 1 crore. In case you are investing in a diversified equity fund, it will take 20 years to reach Rs 1 crore with an assumed return on investment of 12 per cent per annum.

There are a couple of things that will help you in getting the most out of your investment. First is to stay the course after you have done your research and then, invest. There is always a risk that the market cycle will change. Chances are high that you would never guess it right. Hence, do not change your strategy at the wrong time as it is the most devastating mistake that you can make as an investor. The second thing to keep in mind is to minimise the cost of investing. Cost in terms of brokerage, fees and commission directly eat away your returns. In investing, you get what you do not pay for.  

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