Largecaps gave a CAGR return of over 20 percent during 2005-2014 period
Many investors flock to equities with an idea of clocking double-digit returns on a consistent basis.
History suggests that consistent investment into equity market for a period of 10-years or more can make investors richer but returns are not exactly the same every year.
Hence, wealth creation also depends on the time period when you enter the markets.
Spending time in the market is more important than timing the market. If someone invested in 2003 and stayed till 2012, he/she will be a very happy investor.
Because Nifty50 gave a CAGR returns of 18.3 percent in those 10 years and if someone invested in largecap stocks then the CAGR return was over 27 percent in the same period, according to a study conducted by Motilal Oswal Private Wealth Management.
"Holding too much cash or postponing your investments can also mean that your savings are not working hard enough for you and the returns in your portfolio could be lower than what you had imagined them to be," Rahul Jain, Head, Personal Wealth Advisory, Edelweiss told Moneycontrol.
"Therefore, I recommend a very simple strategy - to make your investments when the markets are not doing oh-so-great. This will keep your goals in line with your asset-allocation strategy," he said.
Investor journey in 10-year time spans
Motilal Oswal Private Wealth Management studied market returns in three different time spans of 10 years and categorised investors in three camps— lucky, neutral and unlucky.
The amount invested was Rs 100.
From 2003-2012: Lucky!
Yes, if you belong to the camp where you invested Rs 100 in 2003 in largecaps, your money would have grown to Rs 1,376 by the end of 2012.
From 2005-2014: Neutral
If you invested Rs 100 during 2005-2014 time period in largecaps, your money would have grown to Rs 719 by the end of 2014. Largecaps gave a CAGR return of over 20 percent in the same period.
From 2008-2017: Unlucky, but smart
If you invested Rs 100 during 2008-2017 in largecaps, your money would have grown to Rs 686 by 2017-end. Largecaps CAGR return stood at over 13 percent in this same period.
Market experts suggest there is a four basis rule when it comes to investing in equities.
The first rule is to avoid making an investment decision based on tips offered on Whatsapp or by some random individual, rather make your own informed decision about the company by analyzing the income statement, balance sheet as well as cash flow statement.
Second, investors should use screeners or filters to select stocks that fit their risk-taking ability. Third, one should avoid the FoMo (fear of missing out).
And, lastly, selection of stocks is key. Investing in high-quality companies will guarantee the highest percentage of creating wealth if held for long term.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisionsThe Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .