In general, the returns generated from the markets are a function of the entry timing, longevity of investment and exit timing. Mutual fund data analysed by CAMS points to a strong correlation between the longevity of an investor’s investments and return maximisation in equity funds..

CAMS identified five growth plans of equity category schemes. This comprised two diversified equity schemes, two balanced funds and one ELSS fund which had the highest NAV. The current corpus of investment in the schemes was further classified based on ageing of investment — less than one year, one to three years, three to five years, five to 10 years, 10 to 15 years, more than 15 years and finally investment retained from the launch of the scheme.

Comparing the cost value to current market value for each age interval of the selected schemes threw up interesting insights.

If you had held on to the original investment from the launch of the scheme, your amount would have multiplied 57 times.

On an average, the investment held for 15-20 years multiplied 24 times, 10-15 years multiplied 15 times, 5-10 years multiplied five times, three to five years multiplied three times and one to three years multiplied two times. Clearly, the longer the duration of investment, the higher the factor of multiplication.

Funds as multi-baggers
An analysis was further carried out to identify the nature of investors and their average investment to get insights into who really benefited from the best performing schemes.

Diversified equity schemes in this study had Rs. 2.47 crore of original investment, which has multiplied to Rs. 113.4 crore. About 5,000 investors held these investments with an average investment of Rs. 4,700, while the current value of average investment is Rs. 2.16 lakh.

Balanced schemes in this study had Rs. 1.34 crore of original investment, which has multiplied to Rs. 69.9 crore. About 3,000 investors held these investments with an average investment of Rs. 4,436, while the current value of average investment is Rs. 2.31 lakh.

The ELSS scheme in this study had Rs. 0.29 crore of original investment which has multiplied to Rs. 11.1 crore. About 600 investors held these investments with an average investment of Rs. 4,876, while the current value of the average investment is Rs. 1.89 lakh.

The data shows that a very small number of retail investors stayed invested since inception and gained from long-term investment. Staying invested has helped these investors weather the equity market volatility and bull/bear runs.

(While data for the analysis was provided by the CAMS Analytics team, the views expressed by the author in this article are purely personal)

TIME VS RETURNS
Investments held for 15-20 years multiplied money 25 times
Only a small fraction of investors tend to hold on for very long durations
Shorter time horizon generally results in lower returns