Stock market returns tend to be clustered, and it’s widely known that big gains are followed by years of disappointment. In this article, we examine Sensex’s annual and monthly returns from April 1979, showing that the annual return after 44 years is largely determined by just a few successful years/months.
All returns mentioned in this article are price returns. Dividend income over the past 44 years has been substantial, exceeding price returns by about 2% to 2.5%. However, the absence of a total return does not dilute the core result.
On April 3, 1979, the Sensex price was 124.15 (this is a back calculation, actual trading only started in 1986). On April 1, 2023, the Sensex price closed at 58991.52 for the first time in 44 years. This equates to an annualized return (CAGR) of 15%. Including a dividend yield of about 2%, the real yield is about 17%.
Annual returns allow you to analyze returns from April 1979 through April 2023. For example, the return from April 1979 to April 1980 is 3.5%. For example, the return from April 1980 to April 1981 was 35.25%. A complete list of these returns is below.
Date Annual rate of return
April 1, 1980 3.50%
April 1, 1981 35.25%
April 1, 1982 27.12%
February 4, 1983 -3.76%
March 4, 1984 16.06%
April 1, 1985 42.39%
April 1, 1986 59.57%
April 1, 1987 -8.95%
April 4, 1988 -22.21%
March 4, 1989 82.26%
February 4, 1990 8.16%
April 1, 1991 52.45%
April 2, 1992 267.61%
1993/02/04 -47.32%
April 4, 1994 63.57%
1995/03/04 -12.28%
February 4, 1996 2.81%
April 1, 1997 0.51%
April 1, 1998 15.83%
April 1, 1999 -7.14%
March 4, 2000 37.07%
February 4, 2001 -29.42%
April 1, 2002 -1.85%
April 1, 2003 -11.98%
April 1, 2004 86.33%
April 1, 2005 15.05%
March 4, 2006 75.08%
February 4, 2007 7.70%
April 1, 2008 25.46%
April 1, 2009 -36.63%
April 1, 2010 78.68%
April 1, 2011 9.77%
February 4, 2012 -10.00%
April 1, 2013 7.93%
April 1, 2014 18.99%
April 1, 2015 25.90%
April 1, 2016 -10.58%
March 4, 2017 18.36%
February 4, 2018 11.18%
April 1, 2019 16.89%
2020/04/01 -27.29%
April 1, 2021 77%
April 1, 2022 18%
April 1, 2023 -0.48%
The top six (over 75%) by annual revenue are:
- 267.6% Harshad Meter Fraud (April 1992)
- 86.3% 2000s bull market (April 2004)
- 82.3% (?) (April 1989 recovered from 22% decrease in the previous year)
- 78.7% April 2010 (recovery from the financial crisis)
- 77% April 2021 (recovery after COVID-19 crash)
- 75.1% 2000s bull market (April 2006)
Of these, 82.3%, 86.3%, 77%, and 78.7% were “recovery.” In the previous fiscal year, we incurred significant losses. If investors had fled the market after these losses, they would have missed out on these “big gains.” A return of 267.6% followed by a return of -47.32%. This is known as volatility clustering (large gains and large losses occurring at the same time). Read more here: Market timing works, but not what we imagined.
Let’s set each return to zero and see how these returns affect a 44-year CAGR of 17%. Of course it is unnatural and impossible. This is done just to establish a simple point: (if there are no cheats!) If you want a rainbow, you have to put up with the rain.
Excluding the 267.6% profit from the Harshad Mehta scam, the CAGR (excluding dividends) would drop from 15% to 11.7%. This is a disillusionment, to say the least. All these gains that we dream about looking at past performance stem primarily from fraud.
Note that a 2% dividend yield in 1992 is unlikely, as Sensex was not a large-cap index compared to today’s market cap. Therefore, the dividend yield will be much smaller.
Excluding the top two returns, the 44-year (price) CAGR is 10.11%. Remove the top four. It will be 7.20%. Thus, four large uptrends (the largest of which was fraud) account for more than half of the CAGR we calculate and dream about today.. Remove the top 5 hands. CAGR over 44 years is 5.8%
What do these results mean? These results, though unrealistic, are alarming. But that is the nature of the market (fraud included). Large gains precede or follow large losses. Those who want big gains “in the long run” have to endure both losses and gains.
Overall return depends on one or two big lifts. When that happens, investors need to do more than just invest, they need to invest heavily. After that, the portfolio should be rebalanced to lock in profits on safe assets. Leaving investment value at the mercy of the stock market can result in disappointing end results.
This is why we keep saying everyone is timing the market. Why “time in the market” is not the same as “timing the market”! Only the mutual fund industry asks us to time the market. Exist in the market and obtain notional profits or losses On the other hand, they earn real profits through fees and commissions. Be that as it may, for most of us, investing in stocks (through mutual funds, etc.) is essential to achieving our goals.
Continuing to invest in the market is very important for profit, but staying too long on our welcome can be a case of “Kalamba!” Back to the drawing board! “. This is the simple secret behind investing in stocks. So plan your investments.
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Dr. M. Pattabiraman(PhD) is the founder, editor-in-chief and lead author of freefincal. He is an Associate Professor at the Indian Institute of Technology, Madras. He has over nine years of experience in publishing news analysis, research and financial product development.connect with him via twitter again LinkedIn, again Youtube. Pattabiraman has co-authored three printed books: (1) Goal-Driven Investing Can Get You Rich For DIY investors (CNBC TV18). (2) game changer for young people breadwinner. (3) Chinchu gets super powers! for children.he also wrote 7 others free e-book On various money management topics. He is a patron and co-founder of “.toll only india,is an organization that promotes impartial, fee-free investment advice.
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