the nifty 50 boulevard

Nifty closed the year at 10530.70, up 28.65% from the previous year end. Since the beginning of 1994, over the 24-year period, you got an annual upside of 9.94%, whereas, if you consider the 20-year period, the index rose 12.06% annually. There is a reason for that: Nifty went nowhere from January 1994 to December 1997. In fact, it fell 18% in 1998 before jumping 67.42% in 1999 reflecting the dotcom mania. It was to see double-digit falls in the next consecutive years prior to setting stage for the bulls. From December 2001 to December 2007, Nifty had a phenomenal annual growth of 34.03%. Just when we thought it was unprecedented, it fell sharply reacting to the global financial crisis, and ended 2008 down 51.79%. Although the rise of over 75% in the next year brought cheers to the markets, we were up to some real bear times until 2014. Consider this: Nifty ended 2007 at 6138.60 and 2013 at 6304. Those were obviously frustrating times for the investors, even for those who held long terms views on the markets.

We have had some eight falls during the past 24 years, the positive side of which is that we have had much more rises. From 1083, Nifty has moved to 10530 now. 

Despite that, what is remarkable is, even the 10-year return up to 2017 has been been pathetic at 5.55%. This is the worst 10-year performance by the index in the past fifteen years. Only time we saw such returns falling below 6% was for 2003 and 2004. This should easily reverse for 2018 because Nifty ended 2008 at 2959.15. The trend should continue for sometime unless we see some sharp fall in the index in the coming years. 

The moral of the story is that for the index investors, it is the market return that matters. It is far more useful to invest in the index on a periodic basis, say, each month, over multiple decades to get the benefit of equity investing. The cost averages out during the long haul, and returns should be more satisfactory. Never try to time the markets. Periodic investments are the way to go for the index investors. If possible, it is better to make additional lump sum investments into the index during bear markets. 

As for the stock pickers, the story is different. There are opportunities both during bulls and bears, albeit more so during bear markets. They should concentrate on high quality stocks for the very long period, and for other stocks, anywhere up to three years. For them, the gap between price and value is the key to success.