Market History: A Reality Check for Investors

The bull run of the last 4 years has created a dangerous recency bias.

Every generation thinks their market boom is unique. And they learn the lessons the hard way. History says so.

Time for a reality check - Markets can crash significantly from peaks for reasons we cannot foresee. Markets may not return anything in even 20 years like the ones in the image attached.

Even quality stocks aren't immune. Infosys witnessed an 80% drawdown in the late 90s.

Before you go "all-in" on stocks, consider these 2 questions:

1️⃣ Can you stay invested for at least 10 years without needing the money?

2️⃣ Can you sleep peacefully during 30-50% market drops?

If the answer is NO, it is not worth it.

It is better to build a balanced portfolio of:

• Domestic Stocks

• International Stocks

• Bonds/Government Securities

• Commodities

• Fixed Deposits/PPF

• Liquid Funds

A combination of the above assets when rebalanced on a yearly basis might even do better than a Stock-only portfolio.