Money Matters

Morningstar had published statistical analysis to predict the sensex returns for 2 years based on overall sensex PE (Price to Earning) ratio. http://www.morningstar.in/posts/36274/how-investors-can-use-the-pe-ratio.aspx The results are interesting and give us fair idea where sensex might be headed in coming 2 years. For example if Sensex PE is in range 16-17 the model predicts 26% return over two years and  actual returns have been 28%. As of Feb 2017, the Sensex is sitting on PE of 21.96 and according to model it predicts 1 percent returns over next two years, not a good sign indeed.  It would interesting to visit the post in two years time, to validate the prediction. The  historical Sensex PE can be obtained from BSE website http://www.bseindia.com/markets/keystatics/Keystat_index.aspx?expandable=2 But having said that if you are investing through SIP with long term view , it should not bother you. For those who invest in individual stocks, its good ide...

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...