By: Uma Shashikant
He most commonly held belief about equity investing is that if one selects profit-making companies with established track records and holds them over the long run, one earns stupendous returns. This should rate as a gross over-simplification of the equity investing process. However, this idea is fairly well-entrenched. Many investors provide examples of such selection, except that they do not tell us that they simply got lucky.
Let's go back to the 1980s to the first set of liberalisation measures and the ensuing market boom. The BSE Sensitive Index (Sensex) was around 120 in January 1980 (this was a back calculation as the index itself was released years later). The stocks in the index, which represented the blue chips, included Hindustan MotorsBSE 0.96 %, Century Textiles, Bombay Burmah Trading CorporationBSE -2.33 % and Premier Automobiles.
If an investor had bought these 'good' stocks, he would be bruised by the failure of these companies today. Importantly, the portfolio of this investor would not have InfosysBSE -0.73 %, Bharti AirtelBSE -2.49 % or HDFC Bank, since these companies were not even around at that time. The index today is at 20,000 levels. That means a compounded return of 16% over 35 years.
Source: Hindi News
No comments:
Post a Comment