Let’s take the Nifty. Let’s assume you invested Rs. 10,000 in it in 2000. Now Rs. 10,000 could have bought a certain set of items then. Then the Nifty grew, and grew, and grew. So did the cost of the items you could have bought with that Rs. 10,000. So today that Rs. 10,000 is Rs. 62,428. If you reinvested all the dividends you received also. But in terms of the same purchasing power, it’s a lot lesser! Since inflation has taken up the price of the goods you could have bought for Rs. 10,000 we “adjust” the Nifty for inflation downwards into a constant purchasing power metric. That tells us a story: The real thing to note is: Let’s ignore the “high” of 2007 – just to believe it was an outlier. the highs of 2010 and 2015 were much higher in the Nifty, but they are actually lower in inflation adjusted terms . … (Read On…)
[via Capital Mind]
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