The markets on the brink of a rise! What to do now?

Historically The equity markets have given a return of around 9.5% and inflation adjusted returns have been around 6.3%. Impressive isn't it? However it is rather unwise to assume that the market has given and will give this kind of return on a regular basis. There have been been extremely long periods of bear markets sometimes ranging fro  a decade to over two decades. We recently have had one such decade with a negative return .

Since the year 1900, the S&P has seen such long stretches of bear markets.
However the silver-lining  has always been in the clouds. Analysts always point at the indexes to give us an idea of the share markets. But the problem is that they never point out the fact that the individual investors in their own capacity have always been stock specific unless and until they invest in mutual funds.

The last decade has given a negative return in the stock markets. yes !1 That is true!! But what is always kept in the background is the fact that  a serious  chopping and changing goes on in all of the major indices in the world. If we happen to look at the Indian stock exchanges , the major indices look dramatically different from what they were 12 to 13 years back. Most stocks have been changed keeping in with the dynamic character of the indices. That may be a reason why we shallowly look at the indices and keep the pessimism going.

2008 was a bad year.Really bad year. Stocks were battered out of shape. THE BLUE CHIP OF THE BLUE-CHIPS LOOKED  HORRIBLE!But years have passed .The overlook makeup of the indices didn't look any different yet individual investors have, if not relished,have definitely enjoyed the rise of the individual stocks , both in and out of the indices.

We have enough examples to substantiate our opinion.

Stocks	As on 29/12/2006	As on 2/12/2008	As on 2/6/2016	Dividends paid till date
Tata Motors	166.58	26.27	453.45	117
ICICI Bank	89	178.3	241.35	165
Hindustan Zinc	82.64	32.10	168.25	125
Cipla	251.35	185.35	468.10	20.80
Tata Consultancy Services	611	266.43	2650.15	203.5
Reliance Industries	635.08	536.98	956.25	100
ITC	88.05	84.8	358	55.30

  

And????

It is very surprising that while the stock market indices did not give a heart warming return yet most of the stocks in the above table shows that they have not only doubled the returns in terms of market price but have also rewarded the investors with handsome dividends!!!

Thus it is an imperative on part of the investors to patiently hold on to their shares and buy some more whenever there is an opportunity available. Of course the market is on the brink of a rise. There may be an imminent threat of Fed hike ,Brexit or the Chinese economy slowing down but the markets with respect to individual blue chips do  give substantial returns. And another important thing to keep in mind is the risk-reward ratio!!The market may give a 15% return in the short term but it may cut back the gains also by 35-40% on individual stocks.Discretion is always recommended!

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