In this amc I have met employees who keep a big part of their own money in bank fixed deposits…Lol…but they have sent me a mail telling me the following…
Markets are volatile in the short term.
True, but means NOTHING. It does not mean that it is NOT VOLATILE IN the long run.
As the investment horizon increases, probability of loss reduces. E.g. the table shows that, in the last 39 years of SENSEX,the likelihood of losing money for periods of 15 years or more has been NIL.
This is fraudulent communication. If you think that the same will happen over the next 15 years, it is a LIE. The only true answer is “Past performance is not an indicator of future performance. What they are saying is TRUE. What they mean is a little slimy.
From Mar 1979 to Mar 2019, markets have given a CAGR of 17.1%. Equity returns have been more than the nominal GDP.
True, so what?
SENSEX has compounded wealth at 17.1% over the long run. At this rate, an investment in the stock market has historically doubled approximately every 4.2 years.
Means nothing for the future. You should see this along with the growth rate of the economy, the inefficient markets, the inside information, inflation….and then extrapolate for the next decade…or Long run. You maybe better off in a fund invests 65% in India and 35% abroad. The truth is “I do not know” – and neither does this amc.
They are just implying the following:
We do not understand how the market will behave over the next 5 years. Over the past 5 years most debt funds have beaten equity funds. Great. What does that mean? Nothing. Don’t use past data without understanding how to use it.
Remember: Past Performance is NOT an Indicator of future performance.
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