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- Starting with Rs 10,000, we invested in index when it first touched PE12 and sold out completely when it first touched PE24. Now we waited for markets to correct to levels of PE12 and invested all proceeds from our previous sale. Again we sold off completely at PE24. The process was repeated as long as possible.
- We repeated similar exercise with PE levels of 14 and 22. We bought at PE14 and sold off at PE22. The resultant data is tabulated below.
- As you can see, buying at PE12 and selling at PE24 resulted in just 6 transactions in last 13 years!! But returns have been a phenomenal 26% i.e. Initial amount of 10K has increased to 198K!!
- Similarly, for PE14 & PE22, returns have been a great 18.8%
- This type of investing may require a lot of patience as we only make 6 transactions in 13 years, i.e. one transaction every two years!!