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My Mutual Fund is Losing Money

loosing money in mutual funds

I’m investing in the best performing mutual fund schemes, but after I invest, the fund’s performance starts degrading. What do I do?

This is the story with each one of us. When NAV is low, FEAR factor surrounds us (what to do now?) & when NAV is high, we have GREED (to hold on or to buy more?).

It’s like planting a tree, once the seed is planted, we virtually see it every day, to check on the growth. First few days/ weeks are very exciting, when we see a small bud, leaves sprouting; but after few weeks or a month, it becomes frustrating, as growth is small & we want to see a big tree right away. Whereas it will take years, before the tree is fully formed, will bear flowers & fruits, and above all it must withstand harsh weather& other factors.

Your returns or growth in a Mutual Fund, is an outcome of multiple years of holding period. And in this period, market will behave in both directions, i.e. market may come down resulting in lower NAV or go-up in one swing, with a higher NAV.

Prudent advice; is to just ignore the market swings & stay-put, and only bother about the holding period. No one can control markets, but one can control to STAY PUT 😉.

You are not investing to time the market, but investing for an objective, which has a duration (time-line); for instance, your kid’s education, which is 10 years from now. Therefore, just STAY PUT.

Equity Market Panic

Equity Market

Equity market reacted to two key events yesterday, with Sensex going down 1314 points intra-day or 3.5%.

  • There was a significant sell-off – starting with Yes Bank (down 29.5%) and then spreading to,
  • Dewan Housing (down 45%) and other NBFCs, banks and also the broader markets.

While Yes Bank corrected because of RBI’s denial of tenure extension to the CEO Mr. Rana Kapoor, the fall in shares of DHFL was driven by sale of the company’s debt by a mutual fund at higher yields.

What comes out is the fact that, in the broader markets, this was a knee jerk reaction and prices of most stocks should stabilize once the panic subsides.However, the sharp volatility witnessed, highlights the underlying fragility of the market.

It’s true that the selling was largely sentiment driven with no fundamental negatives in most stocks. However, the price action with almost no buying interest characterizes a market where risk appetite is low.

CAGR, IRR, XIRR, Absolute return – I am confused?

CAGR, IRR, XIRR, Absolute return – I am confused?

As an investor in Mutual Funds, we all come across these terms, very often.

What it means?
Which one to use?
Which one is the best?

Let’s simplify…

CAGR; stands for “Compounded Annual Growth Rate”, and works on a compounding formula, based on a single transaction. Usually CAGR is used for estimating future returns, based on historic returns or assumptions, for a time range.

IRR; stands for “Internal Rate of Returns”, and used for calculating returns for multiple transactions, which are equally spaced in time (past or future). Usually IRR is used for calculating returns for SIP transactions.

XIRR; stands for “Extended IRR”, like above, only difference being, when your transactions are not equally spaced in time. For instance, calculating returns for transactions, which may include SIP, Lumpsum, STP, SWP, etc.Absolute returns; refers to the amount of funds (gain or loss), that an investment has earned, over a period of time. Also referred as the “Total Return”, the “Absolute Return” measures the gain or loss experienced by an asset or portfolio.

Rupee Free Fall against Dollar


Its shocking to see Rupee’s free fall from 65 to 70,& within last few days to 72 today, against USD. Some of the key reasons which are supporting this downfall, are international events. Experts fell that this volatility will continue for some time to come (one to three months) and stability by Mar-19 or earlier, where Rupee to become stable or under 69.

Some of the key events:

USD & Crude Gaining Strength: USD is gaining strength back home with quantitative tightening & interest rates, leading to drying liquidity. This easy money earlier was chasing emerging market assets (in order to generate higher returns). Rise in crude prices on the other hand is playing spoilsports.

Trade War Concerns: US & China is at war, with US proposing tariffs on USD 200bn worth of Chinese imports in August. This sparked depreciation in CNH to the extent of 11.2% since Mar 2018 (1st time since US proposed tariffs). CNH depreciation makes the goods of other emerging markets less competitive, and thus stokes fears of a slowdown in trade of other emerging markets.

Emerging Markets Contagion: Argentina is going thru a rough phase, with new government, public borrowing has gone up by 50%, and they have USD 25bn debt maturity this year. They have asked IMF USD 50bn to bail them out. Similar round is happening in Turkey, with public debt at 233% of GDP, USD 179bn maturing in 1 year and worsening US relations.

Domestic Factors: Political uncertainty with elections around the corner, CAD/ fiscal health with negative FPI flow, & crude gaining, all are putting pressure on the Rupee.

Factors in favour: RBI intervention, with comfortable reserve (upward of USD 400bn), inflation under control, domestic recovery & possible corrective measure (with IMF help) in Argentina & Turkey.

The 4% rule


One of the retirement strategies; comes from a paper written in 1998 by three finance professors at Trinity University. Idea was to study & identify, as to what rate of withdrawal is an ideal rate per year, which is sustainable to the retirement corpus, and can last 30 years.

How the 4% rule works?

To figure out how much money you need for your retirement corpus, multiple 25 with the annual retirement income (you wish that point of time). Let’s say you need 10 lacs per year.

Hence, your retirement corpus will be = 10 lacs multiplied by 25 = 2.5 crores.

Let’s now look at how 4% will work: You withdraw 4% of your total account balance in the 1st year. Then every following year you will withdraw 4% plus inflation, such that effective value of the investment remains same.

Lot of study & back dated testing says that, 4% rule has a 96% probability of leaving more than 100% of you original starting principal.

Equity or Bond?

Equity have the most potential to make more money, but also suffers most during the lows, whereas Bonds gives stability, but without big returns. Therefore, a good mix of 50/50 is appropriate, and with higher tenure in mind, higher dose of equity is suggested, which may go as high to 60% or even 70%.

Its recommended to speak & consult your financial advisor, before initiating such exercise. As 4% rule may sound attractive & simple, but asset allocation model, risk profiling & funds selection requires expertise.

Sensex at 38000 … do we need to cheer, or worry?


In just one-month, Sensex has climbed 3000 points, or jumped straight 8.5%. Till June end, everyone was worried, as market has had a very volatile phase (since last six months). As usual, question is, whether one has missed the bus? or the rally has just started?

Let me highlight on the macro trends:

Crude Oil: 70% of the demand for crude oil comes from transport. Alternative for crude oil is Electronic cars, which will become accessible in another 10-15 years (crude reserves are expected to last 50-80 years). Average crude oil price (for India) should range between USD 55-65, because this price doesn’t affect our foreign reserves.

Interest Rates: India currently stands at a decent inflation rate of 5% as the growth rate is 12%. Thus, the real rate of return is positive. Current economic scenario of increased per capita income, increased demand for consumer goods, increased inflation is beneficial for the equity markets. Inflation going at the level where the real rate of return becomes negative will be harmful for the economy.

Trade Wars: Every news you hear about trade wars is not correct (most of it is media hype). All countries know the adverse impact of increased tariff rates on imports and exports. The current world growth rate is 2.5%. After tariffs, it will become 1.5% which is disastrous. USA and EU have almost settled the trade war.


Insights about Mobile App and App users


We were recently contacted for answering fin-tech questions related to Mobile apps. Below are questions answered by our  Founder & CEO- Manoj Chahar.

1) How many of your users (percentage terms) use the app?

Moneyfrog Mobile-App is used by all our customers (100% usage), averaging once a week, with count going higher per week, whenever the market is volatile.

2) Do you see the app usage increasing in coming times?

YES. With changing lifestyle and increased smartphone penetration, the Mobile-App’s will take precedence over web& human-touch. And with smart functionalities like alerts, reviews, notifications, advisory chat & many more new-age features, usage will only multiply. For instance, chat-bots will supplement human-touch for mundane tasks.

3) What are the benefits of investing through the app as against on the web?

None. Investing (execution – buy/sell) thru Mobile-App is a fad or just a marketing gimmick. One needs to understand, investing is unlike buying a smartphone thru e-commerce sites, or even need based financial products, like insurance (term/car) or loans.

Mobile-App complements (or adds value) to the investment account, thru the value-adds like funds tracking, alerts, notifications, advisory chat, reviews etc. Also investing in Mutual funds (buy or even sell) is a one-off process, which is like once (or few times) in a year. Therefore, execution services thru Mobile-App is just not an attraction, it’s one of the features. (more…)

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