“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” That's a word of wisdom from Warren Buffett.
Moneycontrol charted the data for past 10 years for the stocks in the S&P BSE 500 index. More than 50 stocks in the index gave more than 1000 percent, returns while 169 out of 500 rose 100-900 percent in the same period, according to data from AceEquity.
On the other hand, only 0.16 percent, or 80 stocks, out of 500 gave negative returns in the last 10 years.
So if you are invested in the stocks that have growth potential and a unique business model which could sustain for a decade, multibagger returns can’t be ruled out.
As many as 56 stocks from the S&P BSE 500 index gave 1000-35000 percent returns in the last 10 years. The names include Info Edge, 3M India, Page Industries, Berger Paints, Eicher Motors, Atul, Ajanta Pharma, Astral Poly, Bajaj Finance, Caplin Point and Avanti Feeds.
Note: The above list contains stocks that are part of the BSE500 index in 2020.
It makes sense for investors to hold onto stocks for more than 10 years for long-term wealth creation, but can the same stocks be considered for the next 10 years?
The first and foremost thing which investors have to understand that things change in a decade, and what worked 10 years back might not be even relevant now; hence, portfolio churning is important.
Investors should re-balance their portfolio after 10 years and book profits in stocks which have already rallied or the business model is not sustainable.
“In the last 10 years, lot of changes have happened in the economy with the service sector now accounting for more than 60% of the GDP. The composition of Indices has undergone a major change in the last 10 years. There has been a shift from old economy to new economy stocks and sectors,” Rusmik Oza, Sr. VP (Head of Fundamental Research-PCG), Kotak Securities told Moneycontrol.
“Many non-cyclical sectors and stocks who have the businesses in the B-2-C model can continue to be wealth generators in the next 10 years. Many of the new age growing businesses will have more listed stocks in the next few years and could be the future wealth generators: he said.
Businesses like insurance, asset management, retail, healthcare, small finance banks, specialty chemicals, fintech, CRAMs, eCommerce could be wealth-generating sectors in the coming years.