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
All payout requests will be processed electronically and the credit shall come to the client's primary bank account within 24 hours of having processed the payout request.
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.
What is the share price target of HDFC Bank in 2024? ›
Promoters held 25.52 per cent stake in the company as of 31-Mar-2024, while FIIs owned 47.83 per cent, DIIs 33.32 per cent.
How many days to get HDFC welcome kit? ›
How long does it take to open an account?
| Working Day | 3 in 1 [Savings Demat Trading] |
|---|
| Day 2 | SB Form sent to Bank CPU & DP to DP CPU for Account Opening. SB A/c Opened* |
| Day 3 | Bank a/c linked to Trading A/c |
| Day 4 | Demat A/c Opened |
| Day 5 | Trading A/c opened. Welcome kit Despatched |
1 more rowThe loan application is processed within 10 days by the HDFC Bank. The processing time is calculated from the day the bank receives the application from your end. The processing time is subjective to the submission of all the documents and details needed by the bank to process the loan with the required fees.
Is there any charges for closing HDFC Sky account? ›
Are there any fees associated with closing my account? No, there are no charges involved in the account closure process.
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 Sky safe to use? ›
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 target of HDFC for 5 years? ›
HDFC Bank Share Price Target for 2025 is ₹1,760.63 to ₹1,890.58.
The brokerage largely maintained its FY26 earnings estimates. This brokerage has a 'Buy' rating on HDFC Bank with a target of Rs 1,850.
What is the HDFC prediction for 2030? ›
The HDFC AMC Share Price Target 2028 is 5400.18INR; The HDFC AMC Share Price Target 2029 is 5759.92INR; The HDFC AMC Share Price Target 2030 is 6137.93INR. The Earnings per share that is the EPS of the company is expected to be grown in future by 12.5 percent per annum.
Which bank has a 1000 minimum balance? ›
Punjab National Bank:
PNB customers having savings accounts in rural areas need to maintain a monthly average balance of Rs. 1,000.
Where is my HDFC welcome kit? ›
HDFC Bank will dispatch your welcome-kit to your registered mailing address once the full KYC is completed.
Is video KYC full KYC? ›
Video KYC enables you to open a full KYC savings account instantly. Wherein, after entering your details, you will have the option to get on a video call with our bank executive to complete your KYC process. The video call will ensure you no longer need to visit the branch to complete your KYC.
How long does it take to get HDFC cash redemption? ›
Cashback will be credited to your card account within 2 working days from the date of receipt of this form. It will reflect only in your subsequent credit card statement and will not be considered as payment for the last statement. d. Maximum Reward Points available for redemption will be as per the last statement.
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+1 settlement.
How long does it take to get HDFC remittance? ›
Wire transfers take 24-48 hours. You will be able to track the status of your transfer. As soon as the intended recipient receives the money, the process is complete.
How to withdraw money from HDFC Sky? ›
You can add and withdraw funds from HDFC Sky to your bank account with one single click. As your account is a 3-in-1 account, this is just a company transfer and will process in just seconds.
