Investor’s Delight

Are you worried as a investor? Most probably the answer is yes. If we rewind last five years, it’s been a roller coaster ride for most of the investors. The average return for Sensex in last five years have been close to 0%. The classic comparison is between fixed deposit and Sensex. In last five years fixed deposit have given on an average 8.5% PA, While sensex has give 3% return. In hindsight if we compare, it was much better to own fixed deposit than sensex.

When I read my newspaper today, I can easily feel bearish and feel like selling whatever I have. But to give myself confidence I have analyzed some data which I would like to share with you all. Following are sensex return for last 32 calendar year.

Year	Return	Year	Return
1980	28.86%	1996	4.24%
1981	49.56%	1997	13.31%
1982	3.56%	1998	-17.17%
1983	7.20%	1999	63.57%
1984	8.15%	2000	-20.99%
1985	100.95%	2001	-17.92%
1986	-1.34%	2002	4.44%
1987	-18.43%	2003	74.49%
1988	49.06%	2004	11.62%
1989	18.85%	2005	42.33%
1990	27.56%	2006	48.35%
1991	95.88%	2007	45.61%
1992	33.62%	2008	-51.22%
1993	27.94%	2009	76.35%
1994	17.51%	2010	17.43%
1995	-20.45%	2011 till 7th Dec	-17.71%

Some observations are.

1. Sensex has been negative for 8 years out of last 32 years i.e. 25% of time.

2. It’s been only two times that sensex has given negative return for 2 consecutive years.

3. After 2 years of consecutive negative return in year 1986-1987 sensex gave absolute return of 789% in next 7 years.

4. After 2 years of consecutive negative return in year 2000-2001 sensex gave absolute return of 525% in next 6 years.

5. In absolute terms value has gone up 140 times i.e. 10 Lac investment has become 14 crores in last 32 years (CAGR 16.80%)

6. Fixed deposit in same 32 years would have multiplied to 2.1 crores.

Action Plan

1. Do not panic.

2. Do not sell equity at any cost.

3. Start looking equity more constructively and load in every fall.

4. If market start going up at some point of time, do not sell if you start recovering your losses. Foreign investors wants you to sell at those points.

5. Always remember foreigners wants you to buy high and sell low.

6. This is a golden chance to reverse the trade for us.