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How much returns can I expect from an index fund over the next 15 years?

Dhirendra Kumar explains the kind of returns one can expect from such funds

How much returns can I expect from an index fund over the next 15 years?

Is there any Sensex or Nifty index fund that we can buy for 15 years and get 16-17 per cent annualised returns and does not require much day-to-day monitoring?
- RS Dahiya

I don't know whether Sensex or Nifty would give 16-17 per cent returns for the next 15 years. But if interest rates are going to be around 5-7 per cent, then even 12 per cent returns from such a broad index may not be all that bad. When I look at the oldest index fund, its past may appear to be very impressive. But as we know, the past is not a good indicator of the future, and they could very well be different.

When we are talking about Nifty and Sensex, we are essentially talking about large companies. When we talk about large companies, they reflect something very much in line with the general market. Over and above that, there will be outliers. For example, there will be five companies in Sensex which might do exceptionally well or towards the other extreme by being very disappointing.

So I sense that if you invest in an index fund, you will get reasonable returns from equity which would substantially be over and above fixed income returns and inflation. That should be good enough.

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