Why investing in stock market is perceived as risky and how can we minimize the risk.
There is general perception that investing in equities is risky. Can the perception be changed by some kind of facts and data visualization? In short answers is yes and proof lies in numbers. So I undertook this study of historical returns from BSE Sensex and since this index has history of 35 years its perfect barometer for long term returns from Indian stock markets. I calculated BSE Sensex rolling returns for 1 year, 3 year, 5 year, 10 Years and 20 Year for past 16 years and the results as as follows. Sensex Rolling Returns Rolling returns is the annualized average return for a period ending with the listed year. So 3 year rolling return for year 2003 means annual compounded returns for preceding three year from 2000 to 2003. Now lets convert numbers into graphs. The 1 year returns for every year from 2000 to 2016 is depicted below. This is a very scary graph in may ways. The returns are unpredictable and in some years returns are negati...