Last Updated on December 29, 2021 at 6:22 pm
The Sensex closed past 55,000 on Aug 13th for the first time, and usual trumpets from mutual fund guys blared, “stay invested! The stock market always moves up in the long term”. In this article, we present rolling SIP returns data for the Sensex (1979 to 2021) and the S&P 500 (1900 to 2021) to illustrate while the stock market may move up in the long term, returns (even long term returns) always move up and down!
First, let us look at the journey of the Sensex price index from April 1st 1979 to Aug 13th 2021, first on a normal scale and then on a log scale. To appreciate the utility of the log scale, please see: Are you ready to climb the Sensex Staircase?!
![Sensex Price Index from April 1979 to Aug 2021](https://freefincal.com/wp-content/uploads/2021/08/Sensex-Price-Index-from-April-1979-to-Aug-2021.jpg)
![Sensex Price Index in log scale from April 1979 to Aug 2021](https://freefincal.com/wp-content/uploads/2021/08/Sensex-Price-Index-in-log-scale-from-April-1979-to-Aug-2021.jpg)
When seen this way, it looks nice and comfy. Let us not worry about day to day volatility. The market will anyway move up, sorry I forgot “always”, move up in the long term. So there is no risk! Not so fast!
Let us now look at 15-year rolling SIP returns data. That is, starting from 3rd April 1979, we roll over a 15-year window each month as shown below.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
From Date | To Date | SIP XIRR |
03-04-1979 | 04-04-1994 | 28.39% |
02-05-1979 | 02-05-1994 | 28.06% |
02-06-1979 | 01-06-1994 | 28.24% |
02-07-1979 | 01-07-1994 | 28.88% |
01-08-1979 | 01-08-1994 | 29.12% |
04-09-1979 | 01-09-1994 | 29.61% |
![15 year Rolling SIP returns of the Sensex Price Index from April 1979 to Aug 2021](https://freefincal.com/wp-content/uploads/2021/08/15-year-Rolling-SIP-returns-of-the-Sensex-Price-Index-from-April-1979-to-Aug-2021.jpg)
In the above case, more down than up! We are unlikely to see 25%- plus returns again because the market volatility has reduced since the Harshad Mehta scandal- Sensex at 50,000 – lessons from the 42-year journey. Also see: Sensex return is 16% plus over last 41 years but half of that came from just three good years!
On 43 occasions, that is 13% of total trials, the return was less than 10%. A single-digit return after 15Y has to be considered as a “loss” at least in the past as it is not an adequate premium for the risk taken.
Please note that this 13% (or 0.13) is not a probability! It is just past performance. We cannot keep investing with hope and find out after 15 years our returns are poor. That is a risk we simply cannot afford to take.
Investing each month on the same date is not systematic investing. Regular investing and regular risk management = systematic investing. Learn more about it here: Basics of portfolio construction: A guide for beginners.
To better appreciate why long term returns can go both up and down, we need more market history. We shall turn to the S&P 500 Total Returns index for this using the Schiller PE data.
The S&P 500 when plotted on a log scale again underpins the sentiment that the markets move up over the long term.
![S and P 500 Total Returns Index in log scale from Jan 1900 to July 2021](https://freefincal.com/wp-content/uploads/2021/08/S-and-P-500-Total-Returns-Index-in-log-scale-from-Jan-1900-to-July-2021.jpg)
When this is plotted normally, it looks bizarrely extraordinary because it extends beyond the normal human lifespan.
![S and P 500 Total Returns Index from Jan 1900 to July 2021](https://freefincal.com/wp-content/uploads/2021/08/S-and-P-500-Total-Returns-Index-from-Jan-1900-to-July-2021.jpg)
When we look at the 15-year rolling SIP returns data – there are 1279 such data points! – it is nothing short of extraordinary! The true cyclic nature of long-term equity returns is seen.
![15 year Rolling SIP returns of the S and P 500 Total Returns Index from Jan 1900 to July 2021](https://freefincal.com/wp-content/uploads/2021/08/15-year-Rolling-SIP-returns-of-the-S-and-P-500-Total-Returns-Index-from-Jan-1900-to-July-2021.jpg)
We only see an arm and leg of this cyclicity in the case of the Sensex because of its short history – meaning we have to be more careful about what to expect from equity in the future. In fact, do not expect returns from mutual fund SIPs! Do this instead!
Why does this happen? Why does the index look like it is always moving up but the returns move up and down? The answer is time. The index does not move up 10% or 20% over the same period of time. Sometimes it can happen over days and sometimes over months. See for example: How can a 400% profit result only in 8% return?! Hodling to the moon Risk!
The 90% returns we say after the March 2020 crash in a year usually takes 4-5 years or even more! Volatility is both our friend and enemy. Just like fire, it is essential to beat inflation but get overconfident about it can burn you badly.
The most important takeaway is this cyclicity never goes away. These are 1099 30-year rolling SIP returns of the S&P 500 Total Return Index. The duration has doubled from 15 to 30 years but the spread in returns have only marginally decreased!
![30 year Rolling SIP returns of the S and P 500 Total Returns Index from Jan 1900 to July 2021](https://freefincal.com/wp-content/uploads/2021/08/30-year-Rolling-SIP-returns-of-the-S-and-P-500-Total-Returns-Index-from-Jan-1900-to-July-2021.jpg)
Also, although we say cyclic returns, we have no idea when the returns will peak and when would start falling. This is why both investing and risk management has to be “systematic”. If someone asks what returns can I expect from equity over the next 30 years, the honest answer is, “we do not know; we cannot know.”. The best part is, we don’t need to know!
What should investors do? We must learn to stop listening to AMC hyperbole about compounding (see: Don’t get fooled! Mutual funds have no compounding benefit!) or market rewarding the blindfolded patient in the long run – sometimes it does and sometimes not. We will have to shift our focus from returns (which can fluctuate and not in our control) to a target corpus for a specific goal (which we control better with a variable asset allocation)
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
![Follow Freefincal on Google News Follow Freefincal on Google News](https://freefincal.com/wp-content/uploads/2023/07/Follow-Freefincal-on-Google-News.jpg)
![Subscribe to the freefincal Youtube Channel Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.](https://freefincal.com/wp-content/uploads/2023/07/Subscribe-to-the-freefincal-Youtube-Channel.jpg)
![Follow freefincal on WhatsApp Channel Follow freefincal on WhatsApp Channel](https://freefincal.com/wp-content/uploads/2023/09/Follow-freefincal-on-WhatsApp-Channel-300x83.jpg)
![Listen to the Lets Get Rich with Pattu Podcast Listen to the Lets Get Rich with Pattu Podcast](https://freefincal.com/wp-content/uploads/2023/07/Listen-to-the-Lets-Get-Rich-with-Pattu-Podcast.jpg)
![Lets Get RICH With PATTU podcast on YouTube Lets Get RICH With PATTU podcast on YouTube](https://freefincal.com/wp-content/uploads/2023/08/Lets-Get-RICH-With-PATTU-podcast-on-YouTube-644x362.jpg)
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
![Pattabiraman editor freefincal](https://freefincal.com/wp-content/uploads/2019/11/Pattabiraman-author-freefincal-article-bottom.jpg)
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
![Both boy and girl version covers of Chinchu gets a superpower](https://freefincal.com/wp-content/uploads/2021/02/Article-bottom-Chinchu-gets-a-superpower-front-cover-for-girls-and-boys.jpg)
![Feedback from a young reader after reading Chinchu gets a Superpower (small version)](https://freefincal.com/wp-content/uploads/2021/02/For-bottom-Feedback-from-a-young-reader-after-reading-Chinchu-gets-a-superpower.jpg)
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
![You can be rich too with goal based investing](https://freefincal.com/wp-content/uploads/2016/11/You-can-be-rich-243x300.jpg)
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
![Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want](https://freefincal.com/wp-content/uploads/2017/05/2-mini-Cover-pink.jpg)
Your Ultimate Guide to Travel
![Travel-Training-Kit-Cover-new](https://freefincal.com/wp-content/uploads/2019/11/Travel-Training-Kit-Cover-new.jpg)