What happens when you invest in Nifty50 and stay invested for 3 years?
What happens when you invest in Nifty50 and stay invested for 5 years?
What happens when you invest in Nifty50 and stay invested for 7 years?
I did some number crunching to answer this simple question. The answers are based on the historical data from 1st July 1999 to 12th July 2024. So that’s almost 25 years.
So let’s see…
Invest lumpsum in Nifty50 for 3 years
We have a total of 5612 data points where a period of 3 years was available. This means that the period from 1-Jan-1999 to 31-Dec-2001 is one period of 3 years. 4-Jan-1999 to 5-Jan-2001 is the second 3-year period and so on. The last 3-year period under consideration for the analysis was 13-Jul-2021 to 12-Jul-2024.
Here are a few of the findings. Please spend some time reading the table below and then proceed further:
The table above is self-explanatory but still, here are a few pointers for better understanding and how to read the table:
- Negative returns were delivered for 9.3% of the time.
- Returns between 0% to 8% (why 8% – it is a sort of minimum return that we have in mind as a risk-free number) were delivered 23.1% of the time.
- Returns above 8% were delivered 67.6% of the time.
- The minimum 3-year return generated is -16.4% CAGR.
- The maximum 3-year return generated is +58.9% CAGR!
That was about the 3-year holding period.
Now let’s see the 5-year holding periods.
Invest lumpsum in Nifty50 for 5 years
We have a total of 5510 data points where a period of 5 years was available. This means that the period from 1-Jan-1999 to 31-Dec-2003 is one period of 5 years. 4-Jan-1999 to 5-Jan-2004 is the second 5-year period and so on. The last 5-year period under consideration for the analysis was 15-Jul-1999 to 12-Jul-2024.
Here are a few of the findings. Please spend some time reading the table below and then proceed further:
The table above is self-explanatory but still, here are a few pointers for better understanding and how to read the table:
- Negative returns were delivered for only 1% of the time.
- Returns between 0-8% (which is a sort of minimum return that we have in mind as a risk-free number) were delivered 24.1% of the time.
- Returns above 8% were delivered 74.9% of the time.
- The minimum 5-year return generated is -2.3% CAGR.
- The maximum 5-year return generated is +44.5% CAGR!
That was about the 5-year holding period.
Now let’s see the 7-year holding periods.
Invest lumpsum in Nifty50 for 7 years
We have a total of 5110 data points where a period of 7 years was available. This means that the period from 1-Jan-1999 to 30-Dec-2005 is one period of 5 years. 4-Jan-1999 to 2-Jan-2006 is the second 5-year period and so on. The last 5-year period under consideration for the analysis was 14-Jul-2017 to 12-Jul-2024.
Here are a few of the findings. Please spend some time reading the table below and then proceed further:
The table above is self-explanatory but still, here are a few pointers for better understanding and how to read the table:
- There were NO negative return 7-year periods!
- Returns below 8% (which is a sort of minimum return that we have in mind as a risk-free number) were delivered 15.2% of the time.
- Returns above 8% were delivered 84.8% of the time.
- The minimum 7-year return generated is +3.7% CAGR.
- The maximum 7-year return generated is +28.4% CAGR!
The above requires no further explanation in my view.
But just to summarize, if you remain invested for long enough, the probability of generating inflation-beating returns from equity increases. This is not a guarantee. But still, it can be said with 80-90% probability if not full 100%.
The above returns are CAGR returns and do have the issue that is to be expected for average calculations (read more here). So the journey will be volatile with ups and downs. You have to live with it if you want returns greater than inflation or risk-free products.
So that was about how your Nifty investments fare if you have a holding period of 3, 5 and 7 years. I hope you found this analysis useful. It’s pretty basic, to be honest, but does send out a very strong message. I hope you got the message right. 😉