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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Points to keep remembering

Posted by Muthu on May 19, 2015

1) In the long run, no other asset class can match the returns from equity.

2) Equity returns are never smooth like a bank fixed deposit. The returns from equity would always be lumpy.

3) As Morgan Housel mentions, Apple increased more than 6,000% from 2002 to 2012, but declined on 48% of all trading days. It is never a straight path up.

4) As Morgan Housel further points out, since 1871, the market has spent more than 40% of all years either rising or falling more than 20%. Roaring booms and crushing busts are perfectly normal.

5) So 20% plus or minus return in a year is very normal. Either there would be over performance or under performance. It’s never a smooth flow.

6) Bull markets on an average last for 5 years and bear markets for 3 years. So normally one complete cycle takes 8 to 10 years.

7) It is not possible to time the entry and exit from equity markets. Nobody ever has done it consistently. The best way is to stay the course for long run. In every cycle, markets would continue to make new highs.

8) Secular long term bull runs for one to two decades has happened in various economies when they underwent a consistent high growth. So there is a strong possibility that next one decade can be a golden decade for equities in India. Don’t forget that even in a secular bull run a -20% or more in some years is very normal.

9) Markets (Earnings) grow in tandem with the nominal GDP growth rate. Good quality funds and stocks provide higher returns than the same. In the long run; markets, good funds and quality stocks keep only going up.

10) Warren Buffett has mentioned that he has seen more than 50% fall (in Berkshire’s price) 4 times in a period of 5 decades. In your two decades of investing tenure, you would face such instances may be at least two times. In India, it last happened in 2008. But don’t forget the fact that we swiftly recovered back to original levels within 2 years.

11) Equities are slave to earnings. As long as economy and earnings grow, markets would continue to do well.

12) I’ve been giving many examples of funds multiplying money between 40 to 100 times in last 20 years. In my opinion, there would be such opportunities in next twenty years as well. There is long way to go before our economic growth saturates. We are growing from a low base.

13) Unless you learn to have enormous patience, accept the volatility and lumpiness, you would lose out on the above opportunity. As per last year CRISIL study, during the last 17 years, Indian equity funds have given an annualized return of 22.6%. If this performance repeats for next 20 years, we are sitting before an opportunity to multiply capital by around 60 times.

14) We believe 18% annualised returns is possible for next 2 decades through investing in quality stocks and good equity funds. At 18% returns, money multiplies by 5 times in 10 years, 27 times in 20 years and a whopping 143 times in 30 years.

15) Investing regularly with discipline (SIP) would help you to benefit from stock market cycles and build huge wealth. Assuming the above return of 18%, Rs.50,000 invested a month for next 20 years should give you Rs.11.7 crores. There is no guarantee but the potential is very well there.

16) Patience, long term orientation and staying the course without disruption are some of the excellent tools available within you. Make best use of it.

17) How much ever I write and reinforce, in the end it’s your psychology and emotional discipline which ultimately matters. As always, I would do my best to help you stay the course. But you’ve to make it happen.

5 Responses to “Points to keep remembering”

  1. Siddhartha said

    Great post…..Hats off !! – Muthu

  2. Nishanth Muralidhar said

    Very well-written.Gives a lot of enthusiasm

  3. Jenish Rana said


  4. Very well articulated. I feel no of years in market more important than amount invested which in turn is more important than return generated.

    Keep up the good work sir.

  5. Dear Muthu sir, another good one.

    I feel time spent in market more important than amount invested which in more important than return generated. Even a small investment generating a stable return for a long time can do wonders.

    Keep up your good work. Hope to stay in touch regularly.


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