What is Long Term in Stock Market?

You hear that often from your friends and TV and web that stock market is for the long term. Right? But how long is long term? 1 year, 5 years, or 10 years?

If you think 5 years is long term then here’s the spoiler. If you make 30% CAGR for 4 years and then suffered a 50% loss in the 5th year then your 5-year CAGR is just 7.4%. That is, less than FD returns.

And if you think 10 years is long term then here’s another spoiler. 10 year CAGR of SBI, Bharti Airtel, ONGC, Tata Steel, NTPC, BHEL, Reliance, Wipro, are either ZERO or less than FD returns. Remember, all of them are or were once blue chip stocks.

That’s not all! Today’s star performers are Hindustan Unilever and Infosys. But if you invested in those stocks at its peak in 2000 then your 10-year CAGR would be ZERO or less than FD returns. Likewise, if you invested in Reliance (today’s another top performer) in its 2008 peak then your 10-year CAGR is actually ZERO or less than 4%.

Remember these are the stocks that are recommended at all times by experts. Out of the above stocks, Hindustan Unilever is really interesting. Hindustan Unilever’s 10-year CAGR from its 2000 peak is actually ZERO. But its 17-year CAGR is around 8% and its 18-year CAGR is around 10% and again its 18-year CAGR + Year To Date return is around 12% which is clearly impressive.

So this video is for retail investors who are entering the stock market hoping for huge returns. Thanks to ‘Mutual Funds Sahi Hai’ ads which is clearly encouraging an equity culture in India. And Mutual Fund sellers are advertising their plans as if it’s safe as FDs in the long term.

It’s true that SIP is risk-free but not for 5 or 10 years but when your investment horizon is 15 years or more. Because for one-time investments, the stock marketing timing (or the entry price) does matter. A lot.

Experts always say: BUY. They will recommend a SELL only when the stock is going down and not when it’s going up. So your entry/exit time matters a lot.

Video / Malayalam

I hope you have learned a thing or two from my new video. If so, do share my video with your friends and family on your social media channels!

Happy Investing/Trading! 🙂