Yesterday, I was talking to a young relative of mine about how Sensex had touched 39,000 for the first time and how it had created immense wealth for investors in past years.
But despite being young, this guy was somehow not too convinced about equity’s potential for wealth creation.
So I thought I will try to influence him with some simple data. And once I did that, his mind started working in ways that I liked. Mission accomplished.
I thought of sharing that dataset here.
It’s fairly simple to understand:
Imagine you can invest Rs 1 lac every year. So over a period of 20 years, you would be investing a total Rs 20 lac.
Now, what would be the value of these investments over the years?
I took the Nifty50 returns data of the last 20 years (since 1997-98) and showed the below table to my relative:
After investing Rs 20 lac over 20 years, the value of investments was about Rs 90 lac. This is when the investments were made in January every year.
A large figure of Rs 90 lac excited this relative of mine. But he had a valid question after that.
Since markets fluctuate, what would have happened if instead of investing in January, he invested in some other months?
So I showed him the data for months of April, July and October. Have a look.