If you had just bought the Index in 1979 for Rs. 100 and held it till today…it would be worth Rs. 39000. If you had reinvested the dividends too, it would be worth Rs. 56000. This is a rocking return of 17.3% cagr,

The is a far cry from FD, ppf, gold, most real estate,

It is really obvious, if you had bought the sensex and held it, your portfolio returns would be rocking. Even better if you had bought Wipro in 1980 for Rs. 10,000 it would be worth Rs. 700 crores.

We know all this with hindsight. With modern tools, and analysis, we know all that. In 1979, I was in class 12, there was no mutual funds in India, we had nothing called ‘behavioral finance’. We never thought we could buy the ‘whole market’. There was no www.nonsense….so we did not get any “tips” on what to buy.

I am of course a little skeptical about this 100 becoming 56000 theory also. In 1979 there was no index. In 1984 they formed an index which was backdated to 1979. The CAGR from 1979 to 1984 was manipulated (hindsight bias) and it had a CAGR of about 28% pa. So I would rather settle for the index move from 1984 till 2019 and that is about 12-14% p.a. So for my calculations I use 13% RoE as a cut off..instead of 18% – which looks tough.

Most of the analysis saying “if you had done….” is also difficult because you have to see the headlines during the whole journey. You had the pink papers screaming at you saying “the market has lost Rs. 300,000 crores in market cap…HOW DO YOU MAKE AN investor sit tight? by doing a magic show?

It is the skill of the adviser or friend or something like that which makes a guy hold on to shares. In my case as a family we were very very lucky that we did not need the cash at all. In the last 60 years of our family history never have we needed to sell some shares for buying something or going on a vacation or anything like that. Our marriages, vacations, etc. were met out of current income and cash on hand rather than some sale of shares. So to say “I sat on shares” is right, but God allowed me to sit tight. There was no medical emergency – and some small expenses like cataract was met by medical insurance. That is luck, and some hind sight.

So till 1990 or even 1995 I would call it serendipity and by that time I was learning the theories of investing. I was a broker/sub-broker by 1989 (4 years after becoming a CA) – and am still thrilled that I did not get tempted to churn. Luck. Maybe skill, but I did not know I had it. We did not have the documented history – even now Indian stock exchange history is not well documented. How many of you reading this blog (including my co-author!) have discounted the 1979 to 1984 manipulated performance of the Sensex? Not many, I am sure. There was nobody to advice us that we should buy and hold. I bought and held because I loved the dividends – which were tax free up to Rs. 7000 (under sec 80L). It was better than holding bank or other fixed deposits. Not great insight, but later on learnt that was called “Value Investing”. Wow.

Take the situation in the USA. Only after Shiller came into the market was the data subjected to some rigor – and that was in 1990 or later. So to say “You should have held from 1870 to 1940 or something like that is complete nonsense – the person who held it may have held is because of luck or laziness. It was not surely and “advised” portfolio by far. None of us had good market history. I know of promoters who did not invest in their own units or schemes of their own fund houses. They largely believed in direct equity, not in their manager’s fund management skills. We make a song and dance of fund managers investing in their own funds, do we know whether promoters of MF have invested in their own schemes? No, our regulator has not asked for that data.

So fantasizing about “if you had bought X …44 years ago…” is just fantasy, not a reality. We now have data but it has not been subject to any rigor. To take data and say “if you do a sip in mutual funds (equity) for 22 years you will not make a loss” is again fantasy. You could just hit a terrible road block. You could suffer volatility. You just do not know. You have good history, but then history may not repeat itself in your lifetime!!

It is not easy being an investor. Knowing more actually sometimes makes it far more difficult to be an investor.

Only thing certain in investing are – cost, taxes, and of course death. So convert regular income to capital gains, buy a cheap diversified portfolio, stay calm, and make a will.

Nothing else matters.