Investing in equity is always considered a challenge for many retail investors. Majority of them seek to achieve a return higher than benchmark indexes. More often than not people consider Sensex or Nifty as the benchmark and rate their performance based on excess returns over these benchmarks. Mutual funds meant to cater to retail investors also state the objective to be superior returns when compared to some benchmark.
Unfortunately though, most mutual funds in India have failed to match the returns offered by benchmark indices, leave alone beating them. In this backdrop, any sustainable investment ideology can be considered worthy if it manages to consistently beat the benchmark indexes. Several investors have approached Vivekam for advice on investments with a hope to outperform the benchmark and be left with a positive Alpha (alpha is the excess return by a portfolio over the benchmark index). These investors have been deploying varying amounts of investments at different points of time and at different levels of index. Their combined collective performance may be a better example to gauze the relative strength of Vivekam’s investment products.
If all investments advised by Vivekam were to be deployed in Nifty on the days of investment and the closing price, the combined collective portfolio value of all such investments on today will reflect the returns offered by Nifty. By using sum of products method, it is not difficult to arrive at the returns per annum from Nifty investments. In contrast to the value it could have become, the actual value of portfolios using Vivekam’s products for the entire period is compared in the following table.
Month
1 |
Top Performer
2 |
Runner-up
3 |
Returns By Top Performer 4 |
Returns By Runnerup 5 |
Outperformance
6 |
Capital gains
7 |
Gains after tax 8 |
January |
Vivekam |
NIFTY |
27.89% |
11.15% |
16.74% |
4.18% |
12.56% |
February |
Vivekam |
NIFTY |
23.96% |
10.40% |
13.56% |
3.59% |
9.97% |
March |
Vivekam |
NIFTY |
35.68% |
18.38% |
17.30% |
5.35% |
11.95% |
April |
Vivekam |
NIFTY |
39.06% |
19.18% |
19.88% |
5.86% |
14.02% |
May |
Vivekam |
NIFTY |
90.44% |
43.93% |
46.51% |
13.57% |
32.94% |
June |
Vivekam |
NIFTY |
80.48% |
33.04% |
47.44% |
12.07% |
35.37% |
July |
Vivekam |
NIFTY |
68.30% |
31.66% |
36.64% |
10.24% |
26.40% |
As is visible from the table above, Vivekam’s returns on investments at the end of any given month in the year 2014 were higher than Nifty by a wide margin. Column number 6 in the about able presents a picture of outperformance of Vivekam’s products over Nifty at the end of each month. To counter the arguments touted by naysayers that investments in Nifty or exchange traded funds may be free of income tax, when held for a period more than one year, we provided for short-term capital gains of 15% on returns earned by Vivekam’s products. Column number 7 is the likely short-term capital gains on profits earned by Vivekam’s products. After subtracting the capital gains from the outperformance it is clear that investors would have been better off as displayed in column number 8.
Beating an index which is not actively managed may be difficult for many mutual funds but not for Vivekam. Vivekam also wanted to test its performance with comparable mutual funds for the same period. In this exercise, all investments of Vivekam’s clients at different points of time are presumed to have flown into respective mutual funds at their NAVs on such dates. The cumulative value of investments in these mutual funds as at the end of each month was compared with the live portfolio values of all the clients using Vivekam’s products on those dates. For the sake of this exercise we have selected only the top diversified mutual funds that have more than Rs. 500 crores as corpus.
Month
1 |
Top Performer
2 |
Runner-up
3 |
Returns By Top Performer 4 |
Returns By Runnerup 5 |
Outperformance
6 |
Capital gains
7 |
Gains after tax 8 |
January |
Vivekam |
ICICI Pru Dynamic |
27.89% |
22.91% |
4.98% |
4.18% |
0.80% |
February |
Vivekam |
SBI Magnum Multiplier Plus’93 |
23.96% |
19.93% |
4.04% |
3.59% |
0.44% |
March |
Vivekam |
ICICI Pru Dynamic |
35.68% |
27.37% |
8.32% |
5.35% |
2.96% |
April |
Vivekam |
ICICI Pru Dynamic |
39.06% |
29.95% |
9.11% |
5.86% |
3.25% |
May |
Vivekam |
Birla SL Equity |
90.44% |
70.49% |
19.95% |
13.57% |
6.39% |
June |
Vivekam |
Birla SL Equity |
80.48% |
61.83% |
18.65% |
12.07% |
6.58% |
July |
Vivekam |
Birla SL Dividend Yield Plus |
68.30% |
59.09% |
9.20% |
10.24% |
-1.04% |
Surprisingly, Vivekam’s performance has always been ahead of the top mutual fund for that month in the last seven months in the year 2014. While the second position or runner-up position was occupied by different mutual funds in different months, none of them ever managed to match or beat the performance of Vivekam’s products. Here again, to prove a point, we have provided for a short-term capital gains of 15% on profits earned by Vivekam’s products to check the desirability of Vivekam’s products over mutual funds. Except in the month of July 2014, after capital gains tax, Vivekam’s products have managed to earn higher profits for investors in all the six months during the first half of 2014.
As can be seen from the table, runner-up position was being occupied by different mutual funds proving a point that a retail investor’s very unlikely to have selected such a fund for all of his investments. It is a known practice among retail investors to Park their investments across four or five mutual fund schemes in the name of diversification. In such a situation the average returns earned by such investors will be far less than what was considered as runner-up in the table above.
Ever since Vivekam commenced its operations to provide advisory services to the retail clients, many of them have experienced the ability to earn a decent Alpha in their own portfolios with relative ease. Apart from being easy to work with, Vivekam helps retail clients have peace of mind and no anxiety at any point of their journey in their investment process. Transparency in advice and promptness in ensuring that it reaches clients have been the hallmarks of Vivekam.
Happy investing!!