4 days ago
Nifty 500 Data Shows Why 20% Equity Returns Aren’t Normal
Investors sometimes expect the stock market to earn more than 20% every year.
Historical data shows that this is not the usual experience.
Researchers examined 258 overlapping three-year periods for the Nifty 500 TRI since 2005.
The most common result was an annual return between 10% and 20%.
The latest three-year result was 12.9%, which fits within that common range.
Returns above 20% did happen, but they were less frequent.
Some periods produced returns between -10% and 0%, while others returned 0%-10%.
The data suggests that mid-teen returns are a more practical planning expectation than unusually large gains.
Nifty 500 TRI data covered 258 rolling three-year periods since 2005.
Annualised returns of 10%-20% were most common, occurring 119 times, or 46% of observations.
Returns of 20%-30% occurred in 32 periods, while returns above 30% occurred in 41 periods.
The latest three-year rolling CAGR was 12.9%, within the most common return range.
The historical average was 17.5% and the median was 15.0%, supporting mid-teen planning expectations.
- Who
- Niranjan Avasthi, President at Edelweiss Asset Management, discussed the data and its implications for investors.
- What
- An analysis of historical three-year rolling annualised returns for the Nifty 500 TRI.
- Where
- Across 258 rolling three-year periods for the Nifty 500 TRI.
- When
- The data covers rolling periods since 2005; the latest reported three-year rolling CAGR was 12.9%.
- Why
- To encourage investors to use realistic return expectations and avoid treating exceptional market gains as normal.
Key facts
- Index
- Nifty 500 TRI
- Sample period
- Since 2005
- Observations
- 258 rolling three-year periods
- Most common range
- 10%-20% CAGR
- Frequency of most common range
- 119 observations, or 46%
- Latest three-year CAGR
- 12.9%
- Historical average and median
- 17.5% average; 15.0% median
Quotes
Niranjan Avasthi
President at Edelweiss Asset Management who discussed historical Nifty 500 return patterns.
“Across 258 monthly observations of rolling 3-year CAGR returns since 2005 for the Nifty 500, the most common outcome was a return between 10% and 20%. This range occurred 119 times, i.e., 46% of all observations, making it the clearest centre of gravity in the data.”
livemint.com
“Equity investing rewards patience, but expectations matter. Investors who plan around sustainable mid-teen outcomes are less likely to be disappointed by normal market cycles or tempted to chase risk after unusually strong periods.”
livemint.com
Sources
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