Investing Indian Market Vs USA Market

[rodu123]

Guys,

I just stated the facts and that's it. Everyone's situation is different and you have to decide on your own. I for sure do believe that India is not going to become developed and I never stated that. I am talking about MF or stock investment. I am not here to argue, but pls don't even compare the return of India stock market with USA. Just look at any large cap or diversified mf return in India over the last 10 years and compare it with a US fund and you will know the difference. Plus gains are not taxable.
Secondly there's no cost to MF in India if you know how to invest (direct plans through CAMS or AMC). The fund expense ratio is comparable. And even if its i s high, I am sure no one would mind getting a 23% CAGR over 5 year fund with 3% expense as compared to 14% fund with 1% expense.
Anyway I have every plan to R2I without the burden of USC. I am just here on a work visa and ploughing all my savings into MF. I still have a very long time to hang up my boots and hold on to my investment. My post was not meant to scare anyone but state the facts. To each his own :). Cheers

[rodu123]

Also India and USA markets are fundamentally different. USA is highly efficient market and most of the market info is already discounted in the prices. India is still inefficient. Thats the reason ETF are not a big thing in India. because all actively managed consistently and considerably beats ETF. I guess once the India markets becomes matured like USA, the difference between ETF and actively managed funds will be very less like in USA. An India based feeder ETF or MF in USA can never replicate the performance of actively managed funds in India

[kumte]

Guys,


And even if its i s high, I am sure no one would mind getting a 23% CAGR over 5 year fund with 3% expense as compared to 14% fund with 1% expense.

I do not know the real returns but ii hope you made an apple to apple comparison because I would have made 10-15% return if I just kept dollars under my mattress because of rupee depreciation. Also one drawback of an inefficient market is it helps corruption and cheating by people in the know.
Third I was not comparing returns of US mutual fund vs indian. I was merely pointing out if you are already a usc there is no reason to invest in indian mf.
Fourth I am assuming at least majority of us when we decide to r2i after long stints in USA are financially well off and capital preservation is more important than growth as long as you can keep up with inflation

[Desi]

I just stated the facts and that's it.

OK, let us review the facts with actual numbers.

I am not here to argue, but pls don't even compare the return of India stock market with USA. Just look at any large cap or diversified mf return in India over the last 10 years and compare it with a US fund and you will know the difference. Plus gains are not taxable.

FIVE YEAR PERFORMANCE (June 9 2011, to June 9 2016):

SPY went from 129 to 212, this is a CAGR of 10.5%
Sensex went from 18385 to 26763, this is a CAGR of 7.8%.

The above ignores any dividends from SPY. With dividends the performance still would be much better.

Now the above comparison is nominal basis which is meaningless, unless we take into account either inflation or do the comparison in same currency to get the real returns. So now step 2 is to do the comparison in dollar terms.

Dollar exchange rates: 44.62 Rupees in June 9 2011 and 66.80 rupees today.

$1000 invested in SPY would yield $1644 today for a CAGR of 10.5% (this would be much better if I included dividends of SPY)
$1000 (Rupees 44620) invested in Sensex would yield 64956 Rupees which equals $972 <<< A NET LOSS in SENSEX vs 10.5% CAGR GAIN for SPY.

========

TEN YEAR PERFORMANCE (June 9 2006, to June 9 2016):

SPY went from 151 to 212, this is a CAGR of 3.4%
Sensex went from 10509 to 26763, this is a CAGR of 9.8%.

The above ignores any dividends from SPY.

Now on a nominal basis over 10 years, Sensex looks better.

Now the above comparison is nominal basis which is meaningless, unless we take into account either inflation or do the comparison in same currency to get the real returns. So now step 2 is to do the comparison in dollar terms.

Dollar exchange rates: 45.95 Rupees in June 9 2006 and 66.80 rupees today.

$1000 invested in SPY would yield $1397 today for a CAGR of 3.4% (this would be much better if I included dividends of SPY)
$1000 (Rupees 45950) invested in Sensex would yield 117033 Rupees which equals $1752, which a a CAGR of 5.8%

==========
So over the last 5 years, SP500 beats the pants off of Sensex.
And over last 10 year, CAGR of 5.8% for Sensex is better than 3.4% CAGR of SPY.

I am sure no one would mind getting a 23% CAGR over 5 year fund with 3% expense as compared to 14% fund with 1% expense.

Where is this 23% CAGR from? The numbers above do not show it.

If there are errors in any of my numbers, please let me know.

[rodu123]

As I said, I don't want to argue and to each his own. Pls read my post carefully again and do your research. I am talking abt MF and not ETF tracking some benchmark indices (or Indice replicating fund). As I told specifically, ETFs are not at all popular in India unlike USA. This is a known fact and anyone who invests in India knows it and will in general try to avoid ETF. A saving of 1% in expense ratio doesn't justifies. And anyway expense ratio is internal to a fund. Its shown for an FYI basis. The NAV is net of expense, and so is the computed returns shown by any website (since its computed based on NAV)

This is 5 year [ATTACH=CONFIG]5406[/ATTACH]



This is 10 year [ATTACH=CONFIG]5408[/ATTACH]

And these are consistent performing funds and not cherry picked. And i agree with you, that there was profit from holding dollars all these years bcs of depreciating INR. That's called forex trading and if your aim is capital preservation, then I doubt anyone will recommend this strategy. You could have got similar return by having extremely less exposure to risk as compared to FOREX . And again as per you, if the ultimate aim is to hold funds in USA because of children's fund then you can yourself realize that it's a loss.
The 20 year returns of diversified and large cap mf is 23-24%. You can just go to any mf aggregator website and analyze the info.
As you said, you have to decide your aim along with risk apetite. If capital preservation is your aim, then neither ETF or MF, in USA or India should be in your portfolio (if there it should be very less). There's a reason India has insane amount of FII inflows and the world in general is very bullish abt India (stock market).
The topic was comparing return in India and USA. I am at a stage where I can take risk and willing to. It may be different to someone who has a different risk profile where capital preservation needs to be more important than growth.
And btw , this is my last argument. I wish and hope we both make returns in the long term and achieve our life goals (I think you already have achieved it :).
If holding dollars was the bet and as per you "Dollar exchange rates: 44.62 Rupees in June 9 2011 and 66.80 rupees today.", then hope you realize its not a very good investment as the return is close to 8.5% on a CAGR basis

[Desi]

I am talking abt MF and not ETF tracking some benchmark indices (or Indice replicating fund). As I told specifically, ETFs are not at all popular in India unlike USA. This is a known fact and anyone who invests in India knows it and will in general try to avoid ETF. A saving of 1% in expense ratio doesn't justifies. And anyway expense ratio is internal to a fund. Its shown for an FYI basis. The NAV is net of expense, and so is the computed returns shown by any website (since its computed based on NAV)

This is 5 year [ATTACH=CONFIG]5406[/ATTACH]



This is 10 year [ATTACH=CONFIG]5408[/ATTACH]

SP500 compared to Sensex is not what you are interested in - got it.
Indian market has more inefficiencies than US, I understand that and you are for a managed Indian fund - no issues. I agree.
Just as an FYI, US market also has funds that beat SP500 over 5 years or over 10 years.

BTW, the best performing fund in your 10 year chart shows 18% a year return (I do not know if that is CAGR or some average is taken) and the average of all those funds is about 15% or so.

Now remember that Zimbabwe may give you 40% return and it would be meaningless. Why? Because nominal returns are meaningless, one has to look at real returns net of inflation. When inflation is 10%, you have to get 10% to just break even. This is why nominal returns across countries cannot be compared..

And these are consistent performing funds and not cherry picked.

Excuse me! Have these funds not been selected based on their performance or they have been randomly picked. Of course they are cherry picked based on performance and so ordered in the list based on performance.

And i agree with you, that there was profit from holding dollars all these years bcs of depreciating INR. That's called forex trading and if your aim is capital preservation, then I doubt anyone will recommend this strategy.

I never suggested forex trading, nor included forex trading. You seem to be lost in how to compare growth across countries. Growth of index of one country to another country's index is meaningless on Nominal Basis (economics 101). It has to take inflation into account or has to be done in a common currency with forex translation which has inflation numbers inherent in forex rates.

At the end of the day, if an Indian investor invests in USA, he has to analyze his growth in rupees and vice versa for a US investor investing in some investments in India. This is not forex trading.

You could have got similar return by having extremely less exposure to risk as compared to FOREX . And again as per you, if the ultimate aim is to hold funds in USA because of children's fund then you can yourself realize that it's a loss.

I think you are lost in how to compare growths across countries. Forex is inherent in it and that is not forex trading.

The 20 year returns of diversified and large cap mf is 23-24%.You can just go to any mf aggregator website and analyze the info.

Can you please name 3 such funds that have been in existence for 20 years? Do you know that Mutual Fund Regulation introduced by SEBI is itself just only reaching 20 years.

As you said, you have to decide your aim along with risk apetite. If capital preservation is your aim, then neither ETF or MF, in USA or India should be in your portfolio (if there it should be very less). There's a reason India has insane amount of FII inflows and the world in general is very bullish abt India (stock market).

Excuse me, I don't think we were discussing how one should invest, investment goals etc. We were discussing claims of significantly higher growth in India vs USA and claims of 20% plus on consistent basis.

The topic was comparing return in India and USA. I am at a stage where I can take risk and willing to. It may be different to someone who has a different risk profile where capital preservation needs to be more important than growth.

Exactly, so let us compare, why are you bringing in goals, risks etc. Just compare the numbers and tell me which funds deliver 20% plus over 10 years and tell me which funds have existed over 20 years since you claim performance of 20% plus over 20 years by MFs in India.

If holding dollars was the bet and as per you "Dollar exchange rates: 44.62 Rupees in June 9 2011 and 66.80 rupees today.", then hope you realize its not a very good investment as the return is close to 8.5% on a CAGR basis

I think you are missing the point completely. An investor looks across the globe for investments and at the end of the day computes the return in a common currency. He may use the currency of the country he is resident in. I compared return in dollars, we can compute in rupees and results will be similar because forex translation will apply also then.

Do not miss the key point, that a 5% growth in a country where inflation is 2% is far better than a 20% growth in a country where inflation is 18%. This means nominal is meaningless when comparing across countries. Either you have to do comparison in a common currency or you have to compare REAL returns net of inflation. An investor from China investing in Zimbabwe, India and USA, will at the end of the day compute growth in his currency (Yuan) for his investments across the globe, otherwise Zimbabwe may look stellar.

Another example: Gold price in USD has doubled in last 10 years, but in rupees has tripled. Does this mean that people who want to invest in Gold should buy gold in India instead of in USA? NO. NO. Only reason the value has tripled in rupees is because a rupee of today is much worthless than rupee of 10 year old due to inflation. This is why returns must take inflation or forex into account when comparing across countries.

[dbs]

Reliance Growth Fund started 1995.
Growth since start about 24%.

Do your own due diligence.

I am no expert and do not understand finances. I think there are some more but too much effort and lack of skill to really look at all old bank records and calculate. Some have been traded. Soon Reliance shall go too as no longer much faith in Reliance brand name.

[rodu123]

Desi,

I am sure you have internet and you can google and do some research. As dbs said, Reliance growth Fund has of 24%. I still don't understand what you got from that post or dbs just doesn't know how to interpret figures correctly , but seeing that you thanked him, I am damn sure that you both took this as 24% growth over 20 years.
DBS, going by your statement that 'Growth since start about 24%' and do you own due diligence, pls dont mind but you have just showed your absolute ignorance on this forum about how returns on funds are calculated or supposed to be interpreted. All websites report return on a CAGR basis for time period greater than 1 years. For less than 1 year, its absolute returns. You can validate this by asking any other knowledgeable member whom you trust , or do your own 'due diligence'

Do you really think that I am arguing over an asset class which gives 24% absolute return over 20 years. Its 24% CAGR over 20 years

If not then Are you saying it's a bad return? Are you saying money growing 73 times in 20 years is bad investment.
I doubt anyone will not even try to argue with statements like this.

I will put this simply since I don;t think you guys understand how MF or their returns are computed and the concept of percentages.
Here are the NAV. You can check it out on any reliable website

Reliance Growth Fund: Nav in June 1996 : 11.38, Nav on 13 June 2016: 794. (69 times money. 23.57% CAGR)
HDFC equity fund : Nav in June 1996 : 7.58, Nav on 13 June 2016: 445. (58 times money. 22.5% CAGR)
Franklin blue chip : Nav in June 1996 :6.84, Nav on 13 June 2016: 360. (54 times money. 22% CAGR over 20 years)

If you want more fund, I can tell you but you can do a simple google and check out. And as i stated, pls understand that the return figures and not point to point for the time period, but CAGR

And who give you figures of 18% inflation, did you made it up to support your argument. 20% return at 10% inflation is way way better then 5% return over 2%. Pls learn finance and do your calculation and research and you will see the impact. And btw for FYI, don't skew the inflation figures at 18% for 20 years (exaggeration is a mild term for what you have done). Till 2006-07 inflation was averaging around 5-6%. Its gone to 10 and above after 2008 (and you can add some points as reality and government figure differs. But pls remeber to do it for USA). But anyways, looking by your replies you can even say its 25% to support your arguments
Anyway, for a person living in India it doesn't matter what USD or any currency is. His concern is living in India and generating returns above inflation. He doesn't even care what rupee depreciation as he's not going to buy things in US

And btw pls don't compare economy of India , china or US to to a banana republic like Zimbabwe for your argument. Atleast have some some kind of sensibility.

Anyways, if you living in India and trying to argue about investing in US to beat inflation, best of luck. I would say just open your eyes and try to get out of your pre-conceived notions.

[rodu123]

DBS,

When you say do your due diligence, you should have done yours before saying such an ignorant statement. Looking at people thanked your post, there's some serious basic financial knowledge missing, or people are just so defensive about their pre-conceived notions that they will believe in anything which is said in support of that. Pls see my next post

Reliance Growth Fund started 1995.
Growth since start about 24%.

Do your own due diligence.

I am no expert and do not understand finances. I think there are some more but too much effort and lack of skill to really look at all old bank records and calculate. Some have been traded. Soon Reliance shall go too as no longer much faith in Reliance brand name.

[Lakshya]

Pls learn finance and do your calculation and research and you will see the impact.

Agreed we all need to learn something like.....

[QUOTE]



He doesn't even care what rupee depreciation as he's not going to buy things in US

Are you sure about this? You know that in Zimbabwe Millionaires are living on street...