You have raised a very pertinent question that has the potential of addressing a similar doubt in the minds of many. Thank you.
I really do not know the background facts, still the a few reasons for poor results is quite evident and they can be listed as follows:
- Investment Timeframe: For what time were had they remained invested? Share markets can remain depressed for a few years at a stretch and for the last few years they have not progressed very much. What do you think is the right timeframe for meaningful long term wealth creation? It is a bare minimum 20 years and ideally 40 to 50 years. Why such a lengthy spell? Only over such long periods, the ‘Miracle of Compounding’ discovered and propounded by Albert Einstein will get an opportunity to work for the investor.
- What is the Actual definition of Returns: Most of have been conditioned to believe, in the context of investments at least, that return means increase in the market price of the investment. Of course capital appreciation is a vital ingredient ofreturns but it is in addition to regular and recurring returns: dividends, special dividends and bonus shares. Over 40–50 year interval if you aggregate the regular returns with the capital appreciation at the end, we will be pleasantly shocked at where we stand.
- The quality and purchase price of stocks: Stocks, I am not talking about mutual funds here, need to be purchased of good companies at a ‘Fair Price’. If one buys a stock that has an intrinsic value of Rs.100 is bought at Rs.200, what upside can we expect from the investment, that too over a short period of time?
Friend, ‘Value Investing’ is a time tested and sure path to long term wealth creation. There is no room for doubt or argument about it. Please buy a copy of ‘The Intelligent Investor’ by Benjamin Graham, TODAY, your life will change!
With Best Regards