2018 has been a relatively moderate-to-weak period for stock markets. Though the large cap indices, led by the Sensex is up 5.9%, the midcap and small caps were down. In this context, we have seen some investors getting concerned with the markets and pulling out their investments. We hope the following data will help you get clarity on stock market returns. We have used the Sensex returns to illustrate the point, as it has a longer trading history. Sensex since 1991

  • Since 1991, the Sensex is up nearly 34 times. It opened in 1991 at a level of 1048 and is currently at 36,068 (as on 31-Dec-2018). This translates to an annual rate of return of 13.6% per annum.
  • Interestingly, if we break up each year’s performance into weak (negative return), moderate (0-25%) and strong (> 25%), the break up in terms of number of years is evenly distributed. Even the experts find it difficult to predict the strong years and weak years.
virtues stock markets
  • Now comes the interesting bit. Those investors who broadly ignored market volatility and stayed invested, would have seen their money grow 34 times. If an investor had panicked and sold out and failed to participate in the strong years (i.e., if the investor had not participated in years where gains were > 25%), instead of making 34x over the 27 year period, the investor would have barely doubled the money in the same period (which translates to 1.0% pa or Rs 100, instead of becoming Rs 3400, would have grown to just Rs 132). 


Instead of trying to predict market movements, it is wiser for investors to stay invested – and ensure you participate in the good years, rather than time the markets and miss out on the good years.

As the experts recommend – Time in the market is more important than timing the markets.