If you’ve invested Rs.1 lakh in Sensex on 1’st January 1990 and did not disturb it until 30th
November 2015 (26 years, 25.91 to be precise) it would have multiplied
33 times and become Rs.33.38 lakhs. This works out to an annualized
return of 14.49%.
We
saw that over 26 years Sensex got multiplied by 33 times. Let us assume
you missed the best 40 days spread over the above 26 year period. Then your money would have multiplied by mere 2 times instead of 33 times.
40 days over 26 year period is just 1.5 days per year! So hopping in
and out of the market can dent your returns very significantly. Regular
investing and staying for a long time (which would include the best days
as well) is the way to build sustainable wealth.
Please see the complete data below:
Stayed invested for 26 years: 33times, 14.49% per annum
Missed 10 best days: 12 times, 10.14% p.a
Missed 20 best days: 6 times, 7.22% p.a
Missed 30 best days: 3 times, 4.75% p.a
Missed 40 best days: 2 times, 2.54% p.a
It
is clear that if you’ve even missed the 10 best days, instead of
getting 33 times your wealth, you would have got only 12 times. Just
missing 10 best days in nearly 3 decades costs you so much.
It
is interesting to note that by just missing 10 or 20 best days over 26
year period; market gives you only fixed deposit kind of return.
For missing 30 or 40 best days; you just get savings bank account returns.
Markets
tend to go up sharply on a few days, then consolidate for long periods
and then go up sharply again over a few days. So just missing these days
can bring down your returns drastically. It is impossible to predict
the best days in advance and we would come to know of the same only in
hindsight.
I
also read somewhere that some of the best days of the markets come
immediately after its worst days. It looks like many a time the worst
and best days are lumped together in a short period of time.
There is no way to prevent worst days and time the best days.
Not many get rich from stock markets because they lack patience, hop in and out, losing many of the best days.
So
don’t try to time your entry into the market. SIP is the way. What
matters is how long you stay invested so that you catch as many best
days as you can and maximize your returns.
Start early. Invest regularly. Stay the course. Get wealthy.
