According to reports from Mint, between April 2020 and March 2026, Indian equities delivered exceptional returns with a ₹100 investment in Nifty 50 growing to nearly ₹270, equivalent to an annualized return of nearly 18%. This extraordinary wealth creation has captured significant public attention and driven retail participation to unprecedented levels. The 2026 Annual MF Report by Association of Mutual Funds in India (Amfi) reveals that mutual fund participation has reached record levels with 96.4 million investor accounts and annual SIP investments exceeding ₹3 trillion. Despite this surge in investor interest, economists maintain that consistent stock picking remains elusive. As reported by an IIM professor, the question of which stock to buy comes up frequently at lunch with colleagues, phone calls with friends, and family gatherings, but there is nothing in an economist's toolbox that makes them good stock pickers.
As reported by Mint, economists have conducted extensive research demonstrating that millions of investors analyze company reports, earnings announcements, policy changes, and global developments daily, with new information rapidly reflected in stock prices. By the time an economist finishes reading a company's annual report, thousands of other investors have already studied the same information and traded on it. Research by Brad M. Barber and Terrance Odean in their 2000 paper showed that during 1991-1996, average households earned 16.4% annual returns compared to market returns of 17.9%, while active traders earned only 11.4% annually. This research supports the concept of market efficiency, where opportunities to earn superior returns using publicly available information are limited. The IIM professor emphasizes that opportunities to earn superior returns using publicly available information are limited, with investors relying solely on such information unlikely to consistently outperform the market.
According to Mint reports, economists have established that US stocks earned average annual returns about 6 percentage points higher than risk-free assets such as Treasury bills over long periods, with equities historically offering the highest average excess returns among major asset classes. Similar patterns hold for India, though no one can guarantee future returns. The research emphasizes that diversification is the closest thing to a free lunch in finance, as it reduces both the possibility of spectacular gains from single stocks and the risk of catastrophic losses. As noted by Jeff Yass, co-founder of Susquehanna International Group, diversification is beneficial even if it reduces returns because it reduces risk even more. An important implication of market efficiency is that investors relying solely on publicly available information are unlikely to consistently outperform the market, with many investors likely to underperform due to trading costs and taxes.
As reported by Mint, economists recommend that investors stop trying to outsmart the market and instead focus on building well-diversified portfolios, staying invested through market cycles, and allowing compounding to work over time. Low-cost index funds remain the simplest and most effective way to implement these principles. The message emphasizes that long-term wealth is built not by finding the next winner, but by resisting the temptation to believe that anyone can consistently identify these. History points to the opposite direction, with investors who have remained invested through both good times and bad being amply rewarded for their patience. For most investors, attempting to outperform the market through frequent trading is a losing proposition, with lower returns accompanied by higher portfolio turnover and greater volatility. Recent guidance from T. Rowe Price reinforces this approach, stating that "When picking a list of growth stocks for long-term investment, broad diversification of the risk is the first and most important principle to follow. No one can look ahead five or ten years and say what is the most promising industry or the best stock to own."
