Why do people take risks? The answer is simple. It’s because there is a very sweet, tempting, seducing, deadly, venomous, killing relationship between RISK and RETURN. The greater the risk one takes, the greater is the possibility of getting good returns. (here I am talking about asset classes not investments or investment vehicle) So, in order to get more returns, you need to take risks. You cannot fight a war if you are not at the battlefield. You may be the king or a pawn, but you need to take some risk to win the war. In this article risk means Volatility… Read – 15 types of Risk that effect your investments
It is not necessary for you to keep taking all the possible risks. You may choose your comfort level and choose investment assets as per your risk appetite.
What investors lost (opportunity) between 2009 & 2014 elections?
But right now I am just talking about equity & its performance between 16th April 2009 & 16th May 2014 (61 Months or 5 Years 1 Month). If you notice economic situation has not improved in this period but equity markets gave spectacular returns. WHY?? Because
Sensex generated 120% returns in this period – 17% compounded annualised growth rate…
Fund Category performance
SIP in Fund Categories
Rs 100 invested for 61 Months – total investment Rs 6100
These are not best performing funds – only selection criteria is biggest asset size in their category (top 2 funds)
Equity Vs Gold
Lot of investment went into physical gold or gold related mutual funds in this period. Sensex generated 17% & Gold 12.5% …. Return difference absolute 40%… If we talk about gold performance – 25% of the returns are due to Indian currency depreciation. (5 years back INR per $ was Rs 47 & right now it is 58.5)
The market is a complex animal and cannot be predicted by anyone. Even professional managers can’t predict its future moves. The more investors try to achieve this, the lesser are the chances of a good return. In stock markets, inactivity plays a greater role than activity since a buy and hold strategy delivers better results than regularly timing the markets.
Exactly 2 year back (May 2012) I shared one article, when Sensex was at 16000 level – “Its tomorrow that matters”. Must read this article, I hope you will learn a very important lesson:
Good returns are seldom made on investments made in good times.
Rather, good returns are typically made on investments made in adverse times.
Feel free to share your views or ask any question in comment section.