The Great Indian Stock Market Story of the last twenty years is only about four years, 2003-2007. If you’re finicky, we could add the stellar 1991-92 time when Harshad Mehta pushed the market up 3x in one year and say this: Just five years of the last twenty two have accounted for nearly all of stock market returns.

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Don’t listen to people who tell you that stocks are the best thing ever. If you were 50 in 1991 and you put your money into stocks, you made less money with stocks than by putting money in long term bonds. (I have some that have yielded 16% since 1997!) In fact the market, in September 2001 was just about 49% higher than September 1991, a compounded return that would give you less than a savings bank account deposit (not accounting for dividends or tax of course)

Even the last five years have seen a problem. From 2007 to now, the total market return is a miserable 5.9% per year.

Nearly all of the growth in India’s markets were between 2003 and end 2007.

If you remove this period from the market, the rest has given substandard returns. Of course individual stocks have given great returns. But if you weren’t part of the great part of the story, you probably don’t like the markets too much.

I’m not even sure what my point is, but I think this graph shows you that timing and stock picking can have an advantage over indexed investing. I know this sounds ridiculous to the investor who thinks markets are rational, but you have to find evidence that goes against your thinking.

Thanks to @b50 for showing me a graph that said bank FDs have beaten equities over 20 years. Of course some of it may be cherry picking, and we can refute that forever, but there is really no reason to think that FDs can’t beat stocks in the long term. After all, an FD at 8% in 2007 would have beaten stocks to date, and five years is long-term in most investors’ books.

Now, tell them about it: