Over a decade, I’ve been writing about the same few things again and again.
Each time, I try to write a little bit differently so that you don’t find it repetitive and boring.
Having been our clients for long, you now know gains are lumpy. It happens in spurts. There is no way to time the entry and exit and we stay invested for long to get the benefit.
There are years of high returns, low returns, zero returns and negative returns.
The expected returns of 15% from equity funds over a decade consist of all such periods.
I want to give you today two examples I came across in the book ‘The Thoughtful Investor’ by Basant Maheshwari.
From 1984 to 2013, Asian Paints has multiplied investor wealth by 1767 times, annualised return of 29.4%
Rs.1 lakh invested would have become Rs.17.67 crores over a 29 year period.
An investor would not have got 29.4% every year. As mentioned, he would have had many years of zero and negative returns as well. In fact though the business was growing, from 1992 to 2002, for 10 long years, Asian Paints went up only by 3 times. Someone who sold out of frustration would have lost this precious wealth creation opportunity.
From 1984 to 2013, Nestle has multiplied investor wealth by 322 times, annualised return of 22%.
Rs.1 lakh invested would have become Rs.3.22 crores over a 29 year period.
Here too an investor would not have got 22% every year.
In fact, for seven long years, from 1999 to 2005, the price did not move at all though the business was growing. If an investor would have sold out of frustration, he would have missed the share price multiplying 10 times in subsequent 8 years.
You’ve seen both bull and bear cycles. You’ve also seen periods where nothing seems to happen. But over a 10 year period, you’ve made decent returns.
This is how markets work and this is how it would continue to work.
In market linked products don’t look for yearly performance. Look for what happens over years.
Patience is your biggest edge. Markets would always reward you for the same.