Some thoughts on annual % return

Dear all,

Firstly, I am not sure if this is the right forum to put this post in. So please let me know if this needs to be under some other header. I am posting it here because I look at things technically.

I wanted to share my thoughts on something that struck me today while having a conversation with a friend in office. She told me she has invested in a tax saving MF which promises her to give 12% annually + better returns if the fund performs better. She referred to some Franklin templeton MF.

Now the disclaimer here is that I have not gone back and verified the details but I have no reason to believe that she would lie.

So here are 2 things that I have been thinking:

1. If a persons trading system, whatever it might be, is not generating greater than 12% YoY then frankly, what is the point of doing so much of hard work and being bothered about stock picks and then performance when somebody is doing an equally better job for you without any headache!

I have been doing backtest on some simple trading rules on amibroker - the results refuse to go above 13.x%!!!!

Another disclaimer here is that I have been submerged in learning since 1 year. Its just a thought I am putting across. I still believe in having things in my own hands! Please don't think I am referring to the idea of hanging our boots and relaxing!

2. 12% guaranteed! Why bother about 9% FDs and 8% something else(s)??

I felt it would be good to bring this thought in front of a mature audience and seek some thoughts from everybody - Would request seniors of the forum for some guidance

There is no Tax Saving Mutual Fund which " guarantees " 12% and above returns...they will be flooded with subscriptions. Last 4-5 years mutual funds either tax saving or normal equity funds have given YOY return of less than 5% p.a ( Templeton Taxshield has given sllightly over 12 % ) but the returns are not guaranteed. Few equity mutual funds have shown 3-4 % YOY returns in last 5 years and some have even shown negative returns.

Smart_trade

Smart_trade,

Messaged her to give me the exact name of the fund the moment I saw your reply - I am hoping you are right - would keep me tied up with my quest for knowledge

Assuming that you are correct, I have another question in that case - As per my knowledge, most of the banks who give FDs put the money so received in debt instruments that are safe so that they can honor the FD interest. My question is: Do MFs which part their money in debt instruments generate a better (and perhaps guaranteed) deal?