Who is the most unintelligent investor for stock markets ?
One who buys , whenever the market is at its peak. So, will he be able to make any returns ?
We analysed data and decided to know that what will be the returns generated by most unintelligent but consistent investor in the market.
Prior to this bull run, markets touched its peak in January 2008. Nifty touched almost 6357 in January 2008.
Let us say , our investor purchased one unit of Nifty at this peak in January , 2008 at 6357.
From there onwards, everytime , whenever market touches its monthly peak, he buys one unit every month.- Yes he is the most unintelligent investor and hence buys Nifty at peak. So in February, 2008 he buys another unit at 5545 which was peak for the month.
If he continues to do that , he will have 94 units of Nifty till October , 2015.
And what kind of profit /loss he will make ?
Don't be surprised. His average cost for his 94 units in 94 months will be 5969 only.
So, overall, he is still 40% plus. If you see annualised return , it will be +5 %. This is happening when
– He is always wrong.
– He do not have any analyses.
– He always buys at peak (obviously thinking market will further go up).
– There are multiple huge crashes in the market.
– He has started at the worst time – Peak of all times in 2008, after which market never touched that point till 2013.
Now , what will happen to his profits if he picks up the unit at bottom of market even 20% of times ?
What will happen to his returns if he smartly uses some options to generate small monthly returns ?
What will happen to his results if he had started after 2008 ?
Surly, he will not only beat inflation and fixed deposit returns, but would be standing tall with extra-ordinary returns.
So consistency , patience and planning pays and you do not need to be super intelligent to make returns from the market.