We have already seen the historical returns
of the BSE Sensex, which indicated an average return of about 20% per
year, despite many yearly returns varying from -20% to +60%. The
following table shows BSE Sensex historical data - open, close and the yearly returns of the sensex from 2000 to
2012.
There are some interesting points to note from the above table. Post 2008
crash of about 50% and 2011 negative returns of 24%, markets have given positive returns of 81% and 25%. Also the average returns for the past years is about 20% despite the markets being down 24%. The lesson is pretty
much clear - long term investing pays and one need not bother too much
about the ups and downs of the markets.
During the past few years, the returns from investing in individual
stocks have been varied. Despite markets being at 2 year highs, only a few stocks are at similar highs, while most of them are still languishing well below their historical highs and are down anywhere between 80-90%. The message for retail investors is
clear - index investing is better than individual stocks.
Individual or Retail investors can achieve above-average returns by investing in index through
Exchange Traded Funds (ETFs) like Nifty Bees or Top mutual funds, which have given consistent returns over longer term.
Be a wise investor !
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