At the time of financial crisis in the year 2008, the Nifty (index comprised of 50 prime stocks) attained the peak of 6272 points. In roughly 11 months it had lost almost 3579 points (more than 55% of its gains) and reached the lows of 2584 because of the global sentiments. This is shown in chart 1.
People started selling everything they had in despair and lost most of the wealth they had created for years. Those who entered the market in 2008 January, seeing the terrific rally from year 2005 to 2007 end, had seen nothing but loss of capital. They made the mind that stock market is nothing but a big "Satta".
Opposite to such mind-set there were people who saw this dip as an opportunity. They saw that shares of quality companies were trading at cheap or valuable price. They saw stocks as if they saw clothes available in the mall at the end of season sale. They bought them plentiful and stayed invested for long. As a result please refer to chart 2.
Those who invested in the year 2008 saw a recovery spike, to the levels they saw the dip when all the froth of global crisis was over. As they waited, they received the fruits of patience in terms of stock splits, dividends, bonus and rights. And also a handsome reward of nifty flowing to new highs of 11,000 points. Chart 2 shows where are we after the financial crisis of 2008.
This shows that buying cheap and staying invested for long will definitely pay off your investments and generate wealth.
The recent dips in the markets are opportunities where one can start fresh rounds of investments at consistent intervals in the form of SIP's and gain wealth in long term.
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