4 Charts which will change your perception about Equity

POSTED BY manish ON October 6, 2009 COMMENTS (91)

“Invest in Equity for Long term” You might have heard this sentence from me and others numerous number of times, but have you ever thought, why I say so? Or what is the logic behind that? What is the authenticity of what I say? Why should you believe me?

Hence, I came up with the most time consuming article of this blog till date. Lets explore the world of Equity today and I will show you some amazing numbers and graphs which will change your perception about Equity.

Equity

To make this article Crisp and short, I will show you 4 charts and explain each of them that will show you Power of Equity. Mainly the idea of this post is to show you the return potential of Equity in Different time frames and to find out what is the kind of return we should expect from equity in Long run like 15-20-25 yrs.

For the sake of calculations and source of reference, for almost all of the article I have used value of Sensex Index, but it should be almost similar for any Index Fund, ETF, or a Equity Diversified Mutual fund.

All the below study is based on historical 30 yrs of Sensex data from the year 1979.

1#Sensex Return Chart

Sensex has returns close to 18% CAGR in the long term till date for One time investment and SIP investment.

4 Charts which will change your perception about Equity
This chart shows you the CAGR (Compounded Annual Growth Rate) return of Equity after each passing Month. I have manually noted down the Index value for each month starting from Mar 1979 – Sept 2009 (total 350 months approx) and then did some number crunching (actually a lot) and came up with the CAGR returns the index has given for that time frame.

For example: for the month 36, the Index value was 218.82 and my starting Index value was 122.23 (Sensex actually started from 100, but I had a little late data). So the actual return was 23.16% for SIP investment and 20.78% return for one time investment.

So this chart shows that if you had Invested your money in the start and then hold it for a particular time frame then what will be your CAGR return till that point.

The chart shows the return for two kinds of Investment modes: SIP and One time investment. So Blue line shows the CAGR return if you did SIP investment and the RED one shows the CAGR return if you had invested in Start and sold after ‘n’ number of months.

View Data

Points to Note

  • In the Short term, returns have Wild Swings which is the basic nature of Equity
  • In the long run, returns were in the range to 18-23%, where it goes up and down because of Bull and Bear markets. See Nifty PE Analysis
  • SIP performed better than One time for starting 4-5 yrs and then SIP and One time investment were close enough.

2# Nifty Return Chart

Nifty has given returns close to 18% for SIP investment and close to 12% in 12 yrs from 1997-2009 .

4 Charts which will change your perception about Equity
This one is similar to the above chart just that it is for Nifty 12 yrs data. This chart shows you the CAGR return of Nifty after each passing Month. I noted down the Index value for each month starting from 1979 – 2009 (total 146 months approx) and came up with the CAGR return the index has returned up to that point.

For example: for month 120, the actual return was 23.33% for SIP investment and 13.17% return for One Time investment. So this chart shows that if you invested your money in the start and then hold it for that particular time frame then what will be your CAGR return till that point?

View Data

Points to Note

  • You can clearly see that the returns kept increasing with Tenure and there were less wild swings up and down with Returns.
  • SIP performed better than One time Investment in all the time frames. See that blue line was always higher than Red one for any given month.

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3# Absolute Average Return for Each month (Sensex Data)

This shows you how much of absolute average return in percentage terms would you get if you hold your investment for X months.

4 Charts which will change your perception about EquityThis is an interesting Chart. It shows how much of absolute return can you expect when you hold your Equity investments for 1 month, 5 months, 50 months or 200 months. I will tell you how each duration is calculated.

Let’s say duration is 12 months, so what I did was that I took all the 12 months time periods like Apr 1979-Apr-1980, Mar 1979-Mar-1980, June-1979-June-1980 and like this the last 12 months time duration Sept-2008-Sept-2009, total of 113 different values, then calculated the Returns for each time frame and calculated the average of those 113 time frames.

I finally got average returns of 12 months Investment horizon (total 113 values for 1-13, 2-14, 3-15 month Index value). So I got a single value of 25.60% for 12 month time frame. This is absolute Return and not CAGR return.

So, if I invest 100, I get 125.60 as return.

Please make sure that you understand that this 25.60% is the simple average of 113 values, there might be many values which may be negative, 0, or may be 100%. But we are more interested in what is the average of all such values.

In the same way the Absolute Average return for 120 months was 672.60%, which means that 100 invested would have become 772.60 in 5 yrs. Please understand that we are just trying to show this as the time frame increase the return potential of equity goes up and up.

Don’t interpret it as the return guarantee for any time frame. It’s Equity, Respect it else it will punish you badly for your Ignorance.

View Data

Points to Note

  • In the long run, the average return has increased
  • For close to 15 yrs, the returns on Equity kept increasing but at a lower speed.
  • from 15 yrs to 29 yrs, the Absolute return increased very fast
  • So the real power of equity comes with long term.
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4# Number of Times the return from investment was Positive for some time Frame (Sensex Data)

This graph shows that how many times an investment has returned positive for some particular time frame, for example for 4 yrs time frame (48 months). There would be many 48 months time frame like Mar-1979-Mar-1983 OR Jan-1994-Jan-1998 or any other date, out of all those 48 month time period, the investment gave positive returns for 87.36% times.

So this graph shows how the number of times went up and up as the time duration was more and more.

4 Charts which will change your perception about EquityFor a particular time frame like 50 months, I calculated returns for all possible 50 month window and then saw how many number to times it gave positive return and then divided it with total number of times to get the percentage of times, the return was positive.

So if there were total of 200, “50-month” period and 180 times the return was positive. The result would be 90%. I did this same thing for every time duration from 1-300 months and plotted the graph.

View Data

Points to Note

  • One an average the chart was rising, which kind of proves that Risk of losing in Equity decreases as time duration increases.
  • After 11 yrs, there was no instance when equity return was negative, which means that you invest any time in Sensex index and take your money out after 11 yrs, you will not lose. The return would be positive always.
  • For smallest time frame of 1 month, the percentage was around 55%, which shows that for smaller time frame the equity returns are random like coin toss which is 50%-50% possibility. But as time horizon increases its more of power of Equity, rather than randomness.

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Conclusion

Many people are afraid of Equity because it can give negative returns, which is 100% true and possible, but people do not understand that its not a short term wealth building asset class. Its some thing for long term.

When you invest in Equity for Long term, you are bound to get excellent returns given that you have faith on Statistics, Historical performance and the concept of Equity in general. You can also maximize your investment performance by active participation in your investment and honoring Asset-allocation and portfolio re balancing from time to time.

Time spend and tools used to this article

You might have spent 20-30 min to read this article, but I spend close to 25-30 hours on

  • Finding data
  • Doing calculations
  • Making Computer program in Python: See the Python Code written by me for this article
  • Making Charts in Excel, See Chandoo.org for excellent Tips
  • Actually Writing this article

Comments Please, I would like to hear your views on this article and your views on Power of Equity. Is there something to be added? And Did this article succeed in changing your views about Equity or not?

Note : I will be on vacation now and will keep posting some articles whenever I get time .=”

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91 replies on this article “4 Charts which will change your perception about Equity”

  1. Avinash Sardesai says:

    Manish, a great article. Thanks for these efforts.
    Thankfully in India, market has never been extremely expensive in P/E terms over last 25 years, so generally previous high gets breached in next 5-7 years. However in extreme cases like 1929 US market or 1989 Japan market, it may take a long time to breach previous high. Japan market is down by more than 50% even after more than 25 years!
    In general one can expect similar real returns over the long run after making adjustments for inflation as long as markets don’t get into insane territory.

    1. Hi Avinash

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

    2. Hi Avinash

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      ManishHi Avinash

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

  2. Ashok says:

    good to see something like this which is relevant at any point in time (this was written in 2009!) and comments still flowing in.
    Would it be possible for u Manish to redo the same exercise with latest data – perhaps past 5 years?
    Tjhanks for the good work!

    1. Yes, but I will need some time 🙂

  3. tejesh says:

    for the last chart can you also plot the graph for number of times returns were more than inflation.
    that would be more useful.
    so for example if i invest some money today and at the end of 20 years i am able to say that 100% likely that I will have more than what i invested. It hardly helps because the purchasing power of that money would have gone down substantially.

    1. Good point . Will see if I get time to add that

  4. Kunal says:

    I wrote this in April 2015. It is along the same lines. There is not a single 15 year period where sensex return is negative. http://www.investingfunda.com/a-beautiful-view-sensex-stock-market-returns-over-the-long-term/

    1. Thanks for your comment Kunal

  5. Sai says:

    Hi Mr. Manish, i appreciate the way you provided facts about equity. Thanks for that. Can you please clarify one hidden fact about mutual funds. I calculated average of yearly returns of sample mutual funds- data available in valueresearch. Calculation goes like that you take each year returns of any mutual funds for last 15 years, sum them up and divide sum by 15 years. The average I got so, is far, far higher value than CAGR value published by AMC for those 15 years period. I can understand expense ratio may be a factor, but i do not expect that much reduction in CAGR due to Ex.Ratio only.

    Can you please clarify why this is happening and is there any way to get average value of many years invested.

    Thank you in advance.

    1. You should not be doing it that way . The way you need to calculate it is using CAGR formula . Expense ration will not have that big impact on retunrs

  6. Parth says:

    Hi Jagoinvestor Team,

    Thank you for the amazing info.
    Does investing in equity mean that dividends are also considered in final value?
    For Ex:- if stocks for X amount are bought and held for Y time period,then does one has to consider the dividends dispensed over Y time period in final value of stock after Y time period?Could you please explain how and what one has to consider?
    My question might be naive but I would like to know,also could you please link some articles for further reading.
    Thanking you again,
    Parth

    1. I think you can skip the dividends , we are only talking about growth of value in the share price when we say equity growth

      1. IndranilSarker says:

        In case, someone wants to incorporate dividends as well, he/ she can refer to NIFTY TR Index (Nifty Total Returns Index) which incorporates reinvestment of dividends for the 50 stocks of NIFTY in NIFTY itself.
        However, that actually doesn’t make too much of a difference. The difference between returns from NIFTY & that for NIFTY TR is statistically insignificant (read, not much).

        1. Thanks for that info

  7. DILIP KUMAR says:

    This is quite good article.

    I would like to know similar long term(Since Inception) analysis do exist on Mutial Funds? Where do I get it?

    1. YEs you can get it online if you search for it in some mutual funds analysis websites. I am not sure of which one exactly !

  8. Vikas says:

    Dear Manish
    Good research.
    -Can you compare %age equity return after 5/10/15 years vis – a- vis FD return of 8-10% including income tax applicability for person falling in max 30% tax slab.

    – At what point of time or % of return after 5/10/15 years we should consider that the return is good enough to book the profits .

    1. Will have to do a seperate post on this

  9. Anjali says:

    Excellent post , equity is the best asset class when it comes to returns , no other assets class can beat it in terms of returns. But most of the people who enter the stock market are losers. You need have a longer view and control over your emotions to be successful in the share market

    1. Yup .. very correct !

  10. M.S. Gusain says:

    Dear Manish,

    The Govt. has recently launched inflation indexed bonds. I find the coupon rate extremely low. Retirees would need current income more than future capital gains.
    What is your take on inflation indexed bonds? Are they good for retirees, compared to stay FDs? Regards.

    M.S. Gusain

    1. Yes, right now the bonds rate is lower, but soon more bonds are coming and they will surely have better rates. Wait for it

  11. gabriel says:

    What to expect more while investing in equities, is it the dividend is more important or capital appreciation…

    1. What is more important is a personal question , if some one wants a regular side income ,then dividend matters !

  12. Sushanta Choudhury says:

    Although it is said that we should not try to time the market & equity is the best vehicle in the long run but practically it is not so. Return cannot be considered as good even in the long run as every year it varies.
    Suppose we withdraw in 20th year by making 10%
    we withdraw in 21st year by making 12%
    we withdraw in 22nd year by making 9% ..etc
    ……considering the market volatility.
    It is true that we minimise our loss potential of principal amount by staying invested for long run but withdrawl timing is also important unless we are going for SWP in case of MF.

    1. Yes agree on that .. but do you think that if you have 12% return in 20th year .. then you can have 9% in 21st year ? What kind of drop will make that happen ? Any calcualtions ?

  13. shahabuddin says:

    sir please send me average daily return of icici bank, reliance industries,tata consultancy for last four year i am vary thankful to u

    1. You can calculate it by downloading the data from nse website

  14. Prasanna says:

    Thanks for your Reply Manish.
    Regarding to CAGR & NAV, lets say there is a Policy which says, “Guarenteed return of Highest NAV during the Period” will something equal to “highest CAGR Return in the Period” i will get?
    Sorry, i am confused in both of the terms. Please clarify me.

    1. Prasanna

      Ok lets see this example , suppose you invest in A highest NAV product with nav at 10 , and then in next 10 yrs , the NAV went up and down and finally the highest NAV was 19 , then you ask , what was the CAGR return in last 10 yrs , you get it by ((19/10)^(1/10) – 1)*100% . that will give you a % figure . Calculate it ,

      Also read this : https://www.jagoinvestor.com/2009/05/video-post-on-basic-formula.html

      1. Prasanna says:

        Sir.. This is what I Exactly Looking for.. Hats off to Master!

        1. Good to know you got what you wanted

  15. Prasanna says:

    Hi Manish,
    I am New to Investment & Recently I got to know about your Forum & Really all the articles are Excellent. I have 2 Questions:
    1. Lets say I am going with SIP for 30 Years in Mutual Fund. What are the factors i should consider that I wont Loose money, even i start at any Point in Market?
    2. What is the difference b/w CAGR & NAV. I need somewhat detailed answer on this.

    1. Prasanna

      1. In 30 yrs, I dont think there is much chance of you loosing any money at all . Invest in some good mutual funds and make sure you monitor them in few years

      2. CAGR is a forumula , a concept , while NAV is unit price of mutual funds . When a NAV rises from 10 to 12 in 1 yr, its 20% CAGR return

  16. Subbarao Kommuri says:

    “After 11 yrs , There was no instance when equity return was negative , which means that you invest any time in Sensex index and take your money out after 11 yrs , you will not loose . The return would be positive always .”

    This analysis would make more sense if you plot probability of getting at least 12% return, instead of 0% return.

    Did I made sense?

    1. Subbarao

      I agree that 12% returns is not 100% possible , there is chance that it will be low , but there are chances that it will be higher than 12% . So we are taking average .

      also this post is more to do with givng the idea of power of compounding and how early investing in equity gives good return over long term

      Manish

      1. M.S. Gusain says:

        Dear Manish,

        It is not clear to me how money compounds in equities. As I understand, compounding means gains earned in an year being added to the initial investment which becomes the initial investment for the next year on which gains accrue, and so on, year after year, like in an FD. In equities there can be periods of loss. So compounding to me is not the process that works in equities. There may be reasons other than compounding for gains from equities. Kindly correct me if I am wrong, which I believe, I may be, given that I know far less about equities than you do. However, as your study has shown, equities are best investment for all investors over the long term of more than 10 years. Your interest in educating the lay public about money matters is laudable. Keep up the good work. Regards.

        M.S. Gusain

        1. there are products where its visible like FD or say BONDs . But in mutual funds and Equities, its not a process, because there is no certainity each year. Its something you have to back-derive . I mean if a stock went from 100 to 1000 in 15 yrs, then you need to find out what was compounding. Its not a guaranteed things .

          Manish

  17. harsh yadav says:

    Hi Manish
    Sorry for spamming, but a li’l background f mine.
    M 21, single ( atleast 4 nxt 4-5 yrs ), govt job.
    in hand -> 27*12 = 3.24
    end up investin bout 10k a month ( a 35-40 yrs investment vision)
    ( term insurance, FD, SIP….)

    However, ppl keep on advising me for exposure to stocks for 35-40 yrs investment.

    However, m scared of mkts, so still prefer the SIP way.
    Am i going in the right direction or is EQUITY ,must for me ????

    Sorry for spamming again…

    Thanx

    1. Harsh

      Nothing wrong in being afraidof equity , your risk appetite might be lower, but find out if that fear is REAL ? Are you afraid because of lack of knowledge ? What if you learn about it . read about it and then you might be interested in it ?

      So fear may not be real . Find out more about it , how it works , you will love it , you have long way to go , equity is a must have thing for you .

      Manish

  18. Harpreet Kaur says:

    I would again say nothing but hats off….

    Thanks.

    1. Harpreet

      thanks for the appreciation , keep coming and reading 🙂

      Manish

  19. Raj says:

    Certaily a Good read.
    I am really impressed by the findings.

    I would appriciate if you can tell me where to compare lumsum Vs SIP investment in top MFs?

    Regards,
    Raj

    1. Raj

      A lot of websites like valueresearchonline and morningstar will give you “lumpsum” and “SIP” based comparision , they will give you the returns in both cases

      Manish

  20. Chaitanya says:

    Nothing specific to this post, but in general all ur posts are awesome man!! Have been going thru’ these the last few weeks. Great work trying to educate the public. One post I would like to see from u is reg. HUF. What are the advantages of forming it, how to form it, how to divert income/returns to it etc. etc…

    1. Chaitanya

      Thanks ,I will try to write one on HUF soon . Keep in touch , keep commenting

      Manish

  21. John Maynard Keynes says:

    I think John Maynard Keynes told that in any given generation(30 to 40year time period) there will be very few(none or one or two) stocks in which you can invest with full confidence. This should show us all about the uncertainity, near equivalent gambling of stock market. In this age of artificial intelligent trading algorithms and long term greedy businesses, odds are always against you.

    1. It may be true for a one time investment when you want to forget about the investment for long time , but if one regularly tracks , what you say might not make more sense ? What do you say ?

      Manish

      1. John Maynard Keynes says:

        I don’t agree. Even if you have the full(including insider) knowledge on company and sector regularly, you can not count on investor irrationality, customer purchase behaviors for products/services of company and unexpected political and economic conditions like wars, recessions. So, it may take long time for the stock to reach it’s fair value or meet your expected return/target price.

  22. WalterSchloss says:

    Hi Manish,
    Please bold or emphasize the sentence containing the words “Don’t interpret it as the return guaranty for any time frame”. Because some people loose sight of it. Especially make “Don’t interpret it as the return guaranty for any time frame” in red color also.
    I will give one true fact to scare the people so that
    1. they don’t invest too much of their assets in equity
    2. they get balanced view on equity
    and
    3. they (should) decide the proper asset allocation themselves ( and sleep well at all nights!!!).
    They will avoid all planners who preach asset allocation based on age. Each person should carefully think about himself and decide how much portion of equity he can afford (to loose or gain entirely).
    Coming to the fact:
    Japan stock market was at the same level in 2008 and 2009 as it was in 1988 and 1989. The guy who made one time investment in 1988 did not get any extra. Thank god, he did not loose anything. Others may have some other examples also. One more example is American bonds returned more than American equity for the past 20years(1990 to 2010 may be. But, may not be exact duration, but about the same duration, one or two years less or more.).
    But, real winner may be the guy who invested monthly and rebalanced(to his original asset allocation) yearly. Returns depends on the economy prospects, inflation, unknown, unforeseen and unexpected things, etc.
    Bears(Bad times) will destroy 20% to 90%(may be 99% also!!! Watch out buddies!!!) of market invested money.
    Bulls(good times) will increase the invested money by 40% to 400%.

    1. Yup

      I get your point .

      Manish

  23. Rakesh

    Definately world war will lead to great breakdown in stock markets , no doubt on that , but its like will you stop investing in markets for that fear, its like not driving because of fear of accidents .

    Manish

  24. Rakesh Goyal says:

    Whut if World War III breaks ………..whut will be the equity returnin long term???
    There are always excuses for our market to crash…

  25. Pingback: 4 Charts which will change your perception about Equity(in India « Mithun John Jacob's Ramblings
  26. Sanjay Khantwal says:

    Excellent job. Please keep up the good work.

    1. manish says:

      Sanjay

      Thanks for the appreciation . You seem to be a new reader 🙂 .

      Manish

  27. Abhishek says:

    Hi Manish,
    Equity Investment is not as rosy as you have described. Though 30 years may seem a long time frame it is not so. You have to consider equity returns from a broader perspective . Look at developed markets on more than a 200 year horizon . There are long periods of time when equity returns underperform the bond and cash market. You should do it for bonds,cash ,real estate then do comparative analysis. Japan Nikkie was higher in 1984 than it is now, US bond markets have outperformed equity in the last 30 years or so. Note I am not saying that Indian equity returns may not continue to outperform but I have noticed that people go for blind investing in equity markets thinking they will get 10-12% returns which might not be so. Its very important for you to educate them in this aspect.

    1. manish says:

      Yes .. I would agree with you ..

      The ideas on this article is mainly for Indian markets considering its growth potential for next 30-40 yrs .. the same would not apply to US or say Japan ,because the economy there is very different from India .

      Thanks for bringing this point up .

      Manish

  28. Naveen says:

    Agreed. Equity givesestreturns in long term. Now the big question is how and where to invest?
    For a novice investor like me, Shall I start by investing in ELSS, MFs, gold ETFs, and good individuals stocks?

    Pls provide your views.

    Thanks
    Navenn

    1. manish says:

      Naveen

      As a New comer , you should start through Mutual funds and ETF’;s

      So you can start an SIP in some good Diversified mutual funds https://www.jagoinvestor.com/2009/08/list-of-best-equity-diversified-mutual.html

      Also try Balanced funds and Debt oriented mutual funds , look them at my blog . I have talked about it .

      You can also start in direct equity , but make sure you start small and after some reading .

      Manish

  29. Manish Chauhan says:

    @Varoon

    thanks for recommending those books , I will have a look 🙂

    Manish

  30. Varoon says:

    I have recently completed one book "Asset Allocation" by Roger Gibson. It was amazing stuff, a must read for every Investor & financial Planner. Kind of Data, Kind of thinking process given in the book is mind blowing. I think whenever you get time try hands on that book.
    (Chart 3)Acc. to Roger Gibson Average return will always be higher than Comp. annualized return so they are misleading.

  31. Manish Chauhan says:

    @Arjunsm

    Yes , you will get same kind of result from shares as well .. the only thing is that because of lack of diversification you might see lot of volatility . So the range of returns might expand . Try the same thing on some share and share it with us 🙂

    @Manan

    No , I will not be able to tell you the exact level . Thats a dangerous thing to do . You should take your own decision and take responsibility for that .

    @Anonymous

    Even after it becomes taxable , it would be one of the top debt instrument . So its great for long term

    @Vipin

    Sure .. Mail me the details .

    @ravi

    thanks

    @Premkumar

    Thanks , Suggestions noted .. will think about it 🙂

    Manish

  32. Premkumar SJ says:

    Good Piece of work ..
    Appreciate the amount of time spent on getting this good article which is entirely based on data ..

    Another analysis on comparison equity scored over dept or equity over inflation over a various time periods will be good follow up

  33. Ravi says:

    Thanks a lot sharing your views. You have concentrated on fundamentals and they are clear and crisp. Thanks again for excellent inputs and your effort.

  34. Anonymous says:

    G8 article I loved it …. will get back to you in some time for the suggestion on my portfolio

    Regards,
    vipin

  35. Anonymous says:

    hi,
    what s your take on ppf now that it will be tax liable from 2011, do you think it is a good medium or shuold you look somewhere else

  36. Anonymous says:

    Sir, thanx for your prompt reply. But will you also suggest the level for Nifty/Sensex from where I can start my SIP in mutual fund ?…

    Regards,

    Manan

  37. arjunsm says:

    As always an excellent post Manish.
    "Invest in Equity for Long term" is not only limited to Mutual funds. I have heard from lot of people that you have to adopt the same strategy with stocks as well. Will the same principle hold good w.r.t shares as well?

    ~Arjun

  38. Manish Chauhan says:

    @Charlie .. Hey thanks man

    I am sure this article will clear your and others doubts ..

    🙂

    Manish

  39. Charlie says:

    An excellent article with a lot of hard work which helps in dispelling most of the doubts one has when investing in shares or mutual funds. You deserve a big hand of appalause.

  40. Manish Chauhan says:

    @Rajan T

    Yes , SIP is convinient , has lesser negative downside in long term and less volatile than one time investment . Keep doing equity investment over long term 🙂

    @Varoon

    I am going to .. wait for it . I have already started Part time 🙂

    @Manan

    Truly speaking a long term investment can be started anytime , no matter where is market , but i think it would be wise not to start it right now .. let market drop a bit down .

    @Marshal

    Ohh Great !! , Nice to hear that you are reading is seriously now .. I would recommend to check my ebook on newcomers to stock market in "Download" section at the top . Keep in touch .

    @Vikram

    True, Thats some thing we cant be sure of , that can never be sure .. But we have to trust probability and out country development .. The question you asked was even valid before 10 yrs .. But still equity performed , then why not NOW ? 🙂

    But i am also of thinking that equities will not return exactly the same way , but still it would beat other asset classes by huge margin , atleast 15% CAGR is expected .

    @Swathi

    Let me see if thats possible , Actually the porblem is getting data .. btw i have given you have way !! .. you can try it yourself 🙂

    @SunKumar

    Thanks a lot 🙂

    Manish

    Manish

  41. Manish Chauhan says:

    @Anonymous

    I agree your point, but this article just wants to make a point that "equity gives good return over long term" ..

    @Debashish

    I agree with your point . the Future returns would differ , but the underlying concept remains same that Equity will give very good returns over long term . I have done the study for Nifty already , The sensex will also give similar return .

    You can get the data and try doing it your self 🙂 .

    @Yogi

    Excellent .. You got the Idea 🙂 . Long term investing using Nifty PE would really give some great result . Impressed 🙂

    @Abhikush

    Ok , In that case the returns would be much better .. Nice

    I am glad that you confirmed that you got similar results 🙂 . that kinda backs me up 🙂

    Manish

  42. SunKumar says:

    Great article. A nice practical evidence to know abt the returns on long term.

  43. Swathi says:

    Very good work Manish !
    can you post something like this on Gold ETFs?(if possible)

  44. Vikram K says:

    Great work manish thanks

    but the million dollar qs is that wil it be so from the current levels tooo ?? we might have done magnificiantly over the last years since we were starting from a abysmal base but what now from now onwards

  45. Marshal says:

    very good work, i liked ur style of writing…specially when you mentioned amount of time spend by you to gather these facts.. after that i have actually made a point to read this post very seriously..

  46. Anonymous says:

    I am very much inspired from your article. I have decided to invest in mutual fund. But the question arise in my mind that SHOULD I INVEST AT THE CURRENT LEVEL OF MARKET ? AS NIFTY IS CURRENTLY has P/E greater than 20.

    Regards,

    Manan

  47. Varoon says:

    Why Don't you start Full Time as a Financial Planner?

  48. Anonymous says:

    Once again a good article…Manish..Keep it up..SIP is always the better option.Iam continuing my sip right from 2006…irrespective of carnage happened..Only in Hindsight we can say that our one time investment was a great idea..but there are lot of uncertainities.SIP is easier and effective way to make money in Equities.

    Rajan T

  49. abhikush says:

    For long term returns you have to consider dividends.
    Simply, Return = [(Index_End + Dividends Paid)/Index_Start] – 1

    With your calculations you lose out on dividend income which lowers your return.

    I know there is a Total Return Index on NIFTY but that starts form 2000 (I think, I haven't looked at it for a while). As far as I know there is no such index for SENSEX so you might have to manually do it, which might be a huge exercise for the point you are trying to make.

    I had done a similar exercise couple of years back and I reached the same conclusion as you.

  50. Yogi says:

    Excellent article, to show power of compounding.

    A coupling of SIP, with index P/E, can yield even better results.

    Keep it up.

  51. Debashish says:

    Interesting Article , you have crunched a lot of data for it . How ever I feel using sensex data since 1979 will not give a very correct picture about equity market considering the change in Indian Economy . The Nifty Data gives a more realistic .

    Can you provide a analysis of sensex using data starting 1990 onwards

  52. Anonymous says:

    good work !!
    though Nifty/Sensex return doesn't hold on equity..
    People were not able to invest in Sensex/Nifty till 1997/98 directly.

    So talk about stock 😉
    Many have beaten Nifty/Sensex by Huge margin … Many have beaten investor till Death 🙂
    Another sight to your thought 🙂
    Again Good Work

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