Sadly there is no Dalbar in India to do Economic Surveys, so we have to do a copy paste of the American Investment Behavior and hope that after all Indians are also humans!!

Let us consider that people could have started saving / investing for their retirement…at various points in time. Say 1980, 1985, 1990, 1995, 2000, 2005, 2010 and 2015….how would they have reacted to the situation?

In 1980 a person who started investing would not have much data to go by so would have concentrated on saving the maximum. He would have put more money in debt and very little in equity. Assuming he did put some money in equity he would have got the following returns: 29%, 35%, 25%, -3% and 16%.

Not bad at all…and he would have walked up to me and said ‘Subra you were right and wrong. Yes I got better return than debt, and I did not get 12% as you had said, but I got 22% p.a.


Now turn to the guy who started in 1985…he would have got returns of ¬†45%. 62%. -11%, -21% and 79%.

Now imagine the plight / arrogance of this guy!! When he got 45 and 62% returns he would have assumed that for life he is going to get those returns!! so he may have INCREASED HIS EQUITY EXPOSURE – exactly when risk was peaking…and in the next two years he wiped out most of his gains. Imagine 11% of the increased capital and then 21% – 2 negative back to back years would have scared him.

Would he have removed all the money and missed the 79% bus? Good chance that he might have…and then rued missing India’s greatest bull run..till date.

I hope you are getting the hang of what I am saying..

1. Do not go by the immediate past 5 years and assume that you will get that kind of return. It may not.

2. In the long term equity should give a return which is about 25% more than your risk free return. Assuming that the risk free return in India today is about 8% you could get about 10-12% over a long period of time. And this with a high standard deviation.

3. You save as much as you can and Invest as much as you are comfortable with. Do not let your immediate returns take your eyes off the ball. Remember that a 262% year of 1992 was followed by a -46% return on the sensex. This is a roller coaster ride par excellence.

4. The earlier that you start, the more that you invest, and keep reviewing your portfolio the chances of you reaching your Retirement goals are higher. Much higher.

5. I had taken convenient dates in blocks of 5 years. In real life NOW is NOW. So just start….I can assure you you will get a return superior to debt over a pretty long time.

I know a couple of argumentative Indians will comment saying “What would have happened if it were the 1980s Japan?’ – let us face it, we did not know it in the 1980s. Similarly the American equity investor got whipped in the 1990s ¬†decade.

So start investing now. Stop over analyzing. If you are afraid of pure equity schemes invest in a balanced fund. I like bal funds especially with debt funds being made less tax efficient….


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  1. Agreed.

    70s were bad in the US. 80s & 90s were a pretty good time.
    In India, 90s were miserable, most of the time.

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