Anyone can invest when the going is good. But the tough part is staying on course and investing even the going gets tough. The calculations and the investment decisions are the easy part, it's the self control that will be difficult.

Fact: all of this nerve-rattling action caused by the rise and fall of the Sensex has nothing to do the with the retail investor. To put it more clearly, the direction in which stock prices move should not bother the retail investor.

Invest regularly

The key is to invest regularly. If you had invested every month in a mutual fund -- referred to as a Systematic Investment Plan -- over the past 10 years, you would have been a crorepati now.

We studied the SIP returns of the diversified equity funds over the last 10 years. The question was: How much can an investor earn by this straightforward technique of doing something simple and sensible and going at it for a long time? You'll be surprised.

If you had invested Rs 20,000 a month for the last 10 years in any one of the better funds, your Rs 24 lakh (Rs 2.4 million) could have grown to almost a crore (Rs 10 million). In fact, the best funds could have left you with a stash substantially more than that.

Mind you, the last 10 years were not exactly a trouble-free period. This decade witnessed a fair amount of crisis in the stock market. But, even in a decade filled with regular crashes and scams, slow and steady really does get you there.

If you had invested Rs 20,000 every month in these funds for the last 10 years, this is how much you would have got.

Value: The amount that you would get after 10 years. Figures are in Rs / crore. Rs 1 crore = Rs 10 million
Annualised returns: The percentage returns every year

Start now

But make no mistake, the journey will not be as smooth as you would like it to be. There would be sharp declines. The key is that you should not panic and try to figure out where the market will be in the next week or month or year. Focus on being discipline and consistent.

Let's take a fund -- Reliance Growth.

Investor A began investing Rs 20,000 a month, 10 years ago (August 1996). Investor B began with double the amount every month, five years ago (August 2001).

So, at the end of 10 years, despite investing an equal amount of Rs 24 lakh (Rs 2.4 million), Investor A turns out to be twice as wealthy as Investor B. 

By July 2006, Investor A has Rs 2.06 crore (Rs 20 million) while Investor B, Rs 1.06 crore (Rs 10 million).

How did the Sensex fare?

Let's look at different 10-year periods and see how the Sensex, the barometer of the stock market, has performed.

We looked at the data of different 10-year periods and tried to figure out how much an investor would make if he invested a fixed amount every month.

The best 10-year periods were three: those that ended on December 1992, 1993, and 1995. Each showed an annualized return of over 30%.

The worst was the two 10-year periods ended December 2001 and 2002. They actually showed negative returns.

This will come as a shock to many. Yes, you can lose money by investing in stocks even if you invest consistently over time. But, in all the 18 ten-year periods that we analysed, just two have shown negative returns. Not selling then but holding on for a few more years would have changed this dramatically.

Good funds managed to outdo the Sensex. Because the fund manager will keep juggling his stocks and buying and selling to get even better returns that the Sensex.

To summarise the whole argument, we would say that, rather than being hostile to you, the market is, at worst, an unpredictable friend with varying mood swings. But it's unlikely to betray you in the end.

This article appeared in the magazine Mutual Fund Insight brought out by Value Research.