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Let’s look at Standard Vanilla Nifty 50 graph.

This is one of the most ** insight-less **graphs. There is

*NO meaningful insight*in above graph. (only insight is

*: Nifty 50 grows with blips of falls*) It cannot answer

**basic questions**like:

- What returns can I expect from Nifty 50 over 3 year/5 year/7 year term?
**Obviously**, Nifty 50 recovered from*2008 crisis*. But how**good**has been the bull run post 2008 (*vis-a-vis pre 2008*)?

Let’s look at more insightful graphs.

Most likely you have an SIP (Systematic Investment Plan), where you invest a fixed amount every month into a particular fund. Assuming 3 year SIP, *What returns can you see in 3rd year?*

Let’s look at relevant graph for that question. To read the graph,

- X-axis is the
**end date of SIP**. Forto the end date, a fixed amount was invested EVERY MONTH.*3 years prior* - Y-axis is
(*XIRR**standard evaluation metric*) represents*rate of growth**at the end of SIP tenure.*

Let’s take one data point. <*Highlighted in red*> For this, one had invested a fixed amount EVERY MONTH from the year 2001 to 2004 (36 months). On *1st Jan of 2004*, the 40% XIRR is observed.

**Important Note: **The important aspect is that XIRR is calculated *at the end *of 3rd year SIP, for **EACH** data points. Thus, this represents a *real world scenario*.

Also, note that negative returns are **muted **here! Microsoft Excel *fails *to compute negative XIRRs, imputes it with 0%! So, do keep these negative returns in mind!

What returns can I expect for a 3 year SIP? It ranges from -ve to 60%! This implies: 3 year SIP, returns vary drastically! *Nothing can be predicted on returns of 3 year SIP!*

Similar graph as before, this is for 5 year SIP. XIRR calculated ** at the end of 5th year **for

*each data point*.

Looks much less crazy than 3 year data! Much more stable.

Similar graph as before, this is for 7 year SIP. XIRR calculated ** at the end of 7th year **for

*each data point*.

Much more stable graph. No negative returns. Lots of good returns. **BUT, **there are time periods with returns *below inflation *(~7%). *Despite *7 years of *diligent *SIP, there are cases where returns are be below inflation. <Read grim realities of Inflation here>

Now, let me pick the 5 year graph & highlight some important features!

2 Insights stand out:

**2008 crisis impact:**From vanilla Nifty 50 graph, one would infer that we recovered from 2008. (*And we did!*)**However**, if you look at**returns**graph. It would be clear thatfrom Indian equity market was in*returns***20–40% range pre-2008**.**After 2008, returns are NOT even close!**No-one knows the reason for it.*Shockingly*, it is*NOT even discussed*!!- Returns from Indian equity market has been
**dwindling down**in recent times!*Seems*to have stabilized in the recent times.

While I have used 5year returns to demonstrate these insights, it is valid across time frames (3 year/7 year/10 year etc)

Such important insights

CANNOTbe inferred from vanilla Nifty 50 graph. Yet it continues to be a popular graph to look at! Nuts!

3 year/5 year SIP returns are quite crazy! Returns will have drastic **VARIANCE!**

7 year SIP returns are much more stable. Recent returns range from 5%-15%.

One aspect has to be completely clear, when deriving insights from these graphs. **Total Portfolio returns are going to be in low single digits!** (This was derived in detail here.) The only goal of money management is to ** shield **money from inflation & taxation. Investing is

**NOT**a way to get

*rich*.

NIFTY 50 vanilla graph is NOT helpful to gauge returns!

Personally, I don’t even bother following vanilla NIFTY 50 graph!

Returns from Indian Equity market has been dwindling down*!

3 year & 5 year SIP returns have high VARIANCE!

7 year SIP returns are much more stable.

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