Investment decisions are typically made with the expectation of a certain return against the investment over a period of time. The rule of thumb is higher the risk of the investment, higher the return expectation.
To understand this in detail, we need to know the types of returns – absolute, and annualised (also called compounded annualised growth rate, or CAGR).
Absolute returns are the total returns you gain from an investment, irrespective of the period you hold it for. For example, if you bought a share of Reliance Industries for Rs 1,000 three years ago, and it is trading at Rs 2,500 today, your absolute return on the investment is 150%. However, absolute returns don’t help in comparing between two investment opportunities, as the time, capital and investment horizon varies between different investments. Hence, to make it more comparable, we have annualised returns.
Annualised returns are the Return on Investment, you receive per year (compounded) on your investment. Continuing with the same example from above, if you bought a share of Reliance Industries for Rs 1,000 three years ago, and it is trading at Rs 2,500 today, using the CAGR formula, we can calculate the annualised return.
CAGR formula = ((End Value / Beginning Value) 1/No. of years) – 1
CAGR = (2,500/1,000) ^ (1/3)-1
By this formula, we get that the CAGR for your investment is 35.72%, which is a very good return to get in the long term. It is worth noting that this return will never be linear over the holding period, as markets have bull runs, consolidation phases and bear runs. The stock may have zoomed from Rs 1,000 to Rs 2,450 in the first one year itself and the next two years to move up the remaining Rs 50. One can never guess how a stock will react depending on the market dynamics. The key is to stay invested over the long term and reap the rewards of compounding.
We now come back to our question, what is a good return to expect? That depends on your risk appetite, and the ability to hold on to stocks during the difficult market conditions. But historically, a return of 12-15% per annum compounded over the long term is considered very good, as this will grow exponentially as time goes by. However, such returns are difficult to achieve year on year and will vary depending on the market conditions.
For example, if we invest Rs 1 Lakh in a fund offering 12% returns per annum, and don’t touch it at all, with the returns reinvested in the fund, we are looking at a corpus of Rs 26.74 Lakhs in 30 years. This is without adding anything to the fund, and just letting the returns compound for themselves.
Warren Buffett, who is arguably the greatest investor of our time, has generated a consistent 20% return for Berkshire Hathaway shareholders since 1965. By simply doubling the performance of the S&P 500 in the USA, he has generated 2472627% returns as compared to the 15019% returns of the index in that period. It is also well known that Buffett has earned 99% of his current wealth after the age of 52. Hence, there is no bigger endorsem*nt to staying invested and looking at the bigger picture.
In conclusion, one must look at sustainable long-term benefits of investment, as they will compound over a period of time. Return expectations can vary, depending on the level of risk of the investment but anything between 12-15% annualised can be considered a good rate of return.
FAQs
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Can NRI open HDFC Sky account? ›
Registering for the HDFC Sky NRI Account is a good idea for non-Indian residents looking forward to trading in the delivery segment and investing in mutual funds. HDFC Sky boasts diverse financial services, including demat, trading, IPO, F&O, and PMS services.
How to complete US onboarding in HDFC Sky? ›
- Register your account. Fill in your personal details.
- Complete KYC. Submit your address proof and ID proof.
- Add Funds. Fund our account in USD from multiple banks.
Is my money safe with HDFC SKY? HDFC SKY is a SEBI-registered broker and your securities are held with a reputed depository participant, ensuring a safe and secure investment environment.
Who is the owner of HDFC Sky? ›
The present web site, www.hdfcsky.com is owned, operated and maintained by HDFC Securities Limited (hereinafter referred to as “HDFC SECURITIES”), a Company incorporated under the Companies Act, 2013 having CIN: U67120MH2000PLC152193 and having its registered office at Floor 8, I Think Techno Campus, Building-B Alpha, ...
What is the interest rate of MTF in HDFC Sky? ›
With BSPL, you can buy 4x stocks where the remaining amount will be paid by HDFC Securities. It is also called E-margin. The amount that you borrow from HDFC Securities, it is to be repaid in instalments. The MTF interest rate with HDFC Securities is 12%.
Which is better HDFC or Icici for NRI account? ›
ICICI is a highly recommended trading account for NRIs who are looking for investing in the stock market and mutual funds in India. It offers a convenient way to invest with competitive brokerage charges. It offers a range of investment options along with a dedicated RM, NRI support desk, free research, and tips.
Is HDFC good for NRI? ›
HDFC NRI account benefits
Overall HDFC can be a great option for NRIs looking to park and manage their earnings in India and abroad. On top of the account options, there are additional benefits: Interest earned on NRE accounts can be tax-free in India.
Which broker is best for NRI? ›
Zerodha and Prostocks are the two best NRI discount brokers in India. Prostock is the low-cost NRI trading broker that charges Rs. 100 flat brokerage on NRI trading while Zerodha charges Max Rs. 200 per order brokerage.
What is the 4 step onboarding process? ›
The entire program includes preboarding, orientation, training, and transition to a new role. Onboarding covers all the specifics of new employees.
Invest in overseas companies at just your fingertips using HDFC Sky app. You can invest in top blue-chip US companies like Netflix, Amazon, Apple, Tesla, Starbucks, Facebook, Nike, Mcdonald, etc. All you have to do is open a global investment account with HDFC Sky, search for any US stock, and place buy/sell order.
How many days is onboarding? ›
How long does onboarding usually take? As mentioned, hiring managers and HR managers agree that employee onboarding should last a minimum of three months. 1-2 weeks certainly isn't enough time to make employees comfortable at the office and expect them to deliver.
Which one is better HDFC or Axis? ›
Overall, the past stock performance of HDFC Bank, ICICI Bank, and Axis Bank reflects the overall strength of the Indian banking industry. While HDFC Bank and ICICI Bank have been more consistent performers, Axis Bank has also made progress in improving its financial performance and investing in digital technology.
What are the cons of HDFC Bank account? ›
Drawbacks of HDFC Bank:
- The bank has limited monthy free transaction. After the the free transaction are used up, they start charging you transaction fee.
- HDFC is not up to the mark in terms of technology and features availability.
However, HDFC Securities is a full-service stockbroker in India. Unlike HDFC Sec which allow only HDFC bank based customers to open a trading and demat accounts. However, HDFC Sky is open to all whether you have a bank account with HDFC or any other bank in India.
How much time does it take to release funds from HDFC Securities? ›
ENCASH facilitates the customers to get the sale proceeds credited to their bank accounts on trade date. This would be enabled only for Sell transactions and for orders executed in this product the sale proceeds would be credited on the same day as against the normal sell trade & T+2 settlement.
How long does HDFC international remittance take? ›
Time it takes to receive money in India with HDFC
| Transfer type | Time Taken |
|---|
| Quickremit (South East Asia) ² | 48 hours |
| IndiaLink³ ⁴ | Instant credit: 2 hours (subject to NEFT/RTGS cut-offs) Demand Draft: 3 working days |
| Wire Transfer ⁷ | Within 24 hours after sighting the credit in Nostro Account |
4 more rowsAfter the HDFC credit card payment is done, how long does it take for the money to be credited to my credit account? The exact number of days needed for the money to be credited to your card account depends on the credit card payment method that you choose. Most methods usually take around 2-3 working days.
How long does it take for HDFC forex card to arrive? ›
You can apply in just three easy steps. If you are not a Savings customer, follow the steps outlined in the Forex Card online application form and, after successful completion, you can get your card delivered at your doorstep in three days. If you choose to personalise your card, you may have to wait for a week.
