The other day, a TV channel asked me: “Suresh, where will the Sensex be in 2018?”
I said: “I don’t know.”
Do you know why I said that?
Let’s rewind to a year ago, in December 2016. People asked leading market analysts and pundits their opinion. This is what two of them said:
I would not use the word gloomy but I would say it is a challenging year as we enter 2017. – Morgan Stanley.
I don’t see the Sensex going below 26,000, but it is going to be a struggle to get to 29,000. My range for 2017 on the Sensex would be 26,000 to 29,000– CreditSuisse.
Both of them, top players with hundreds of in-house experts, were dead wrong.
In 2017, the one-year return of large cap funds was 30%, multicap 38%, mid-cap 43% and the much-feared small cap 55 per cent(Whooping 9- year of FD return).
I too went wrong. I bet big on large and multicap in 2017 than on mid- and small cap. But I am happy with the return my investors got. A solid double-digit return in an uncertain year.
Also, remember that market returns and investor returns do not match most of the time. When the chips are down, the investors try do bottom fishing never does it. When the markets are high, they wait for it to correct. Most of the time, their calls are never right.
Now you understand the difficulty in trying to predict the market. Yet, every year, investors while putting in their money want to know how much they should expect.
My suggestion is that it depends on your goals and your appetite for risk.
If your investment horizon is one year, it is better settle for 6-6.5% in safe investments. For 1-3 years, you can expect 10-13%; for 5 years and above, if you can rebalance the portfolio when needed, you can expect returns in excess of 15%.With US market showing inverted yield curve these may be by and large good return expectation.
While investing in the equity market, do not predict the yearly movement. If you do, you should be prepared for surprises. Also, don’t be greedy. When you set your eyes on a 50% per cent profit, you should be able to rebalance your portfolio for smooth investment experience.
A famous market expert, Nick Murray, once said: When you invest in stocks, you are an owner of business. When you invest in bonds, you are the lender to business. Everything else is commentary.
Wish you a happy and joyful investing year.