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What Is Your Reference Point?

"We must base must our views of future policy on a knowledge of past experience'

                                                                                                                        - Benjamin Graham


1 Day, 1 month, 3 months, 1 year, 5 year or 10 years?

The context is “correction” afflicting the equity markets.

Here’s how equity markets have performed as on closing of 13th March 2026:

1 Day: Minus 2.31%

1 Month: Minus 8.21%

3 Months: Minus 9.72%

1 year: Up by 7.03%

3 years: Up by 15.05%

5 years: Up by 12.31%

10 years: up by 14.35%

All return figures are basis Nifty 500 TRI. Data source is www.niftyindices.com.

Situation is bad – if you look at the returns upto 3 months duration.

Even though 1 year returns are in positive territory, they are nowhere near the much (ab)used ROI of 12% used in investment end period corpus projections. In fact, the returns are quite close to fixed rate of returns essentially meaning investors have not been compensated for the risk they took. Bad as it may seem, it is nothing extraordinary. Long pull data for investment horizon of 1 year shows returns have been:

-          Below 8% for slightly more than one third of the times

-          In negative territory for nearly one fifth of the times

 

One who knows stock markets history well will then make his/her own assessment of whether the markets have really "corrected" to not so normal levels.

And as data for 3 years and beyond stands, returns are still in quite respectable ranges - despite the brutal fall in latest 3 months. 

And that’s why establishing reference point before looking at market situation assumes critical importance. Market returns data will have more actionable insight if one goes by this sequence.

Have a nice weekend!!!

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