A long bull run has made freakish returns seem normal. Time to curb your enthusiasm.

livemint.com:

“Earn ₹200 crore in 30 years through a ₹5,000 monthly SIP in a smallcap index," screamed a video on social media. The video rather boldly based the calculations on the 30% annual returns of a Nifty Smallcap 250 index fund over the past five years. While such returns are attractive, they're not sustainable. Here’s why.

First, you must consider the historical annualised returns of the Nifty Smallcap 250 over longer periods – 7-20 years – as super-high returns tend to moderate over time. Take the case of an investor who started investing in 2009. According to Capitalmind, the returns were as follows: 111% in the first year, 58% over two years, 17% over three years, 23% over four years and 15-22% per annum from year seven onwards. The same is true for the Nifty 50 and Nifty Midcap 150 indices, in which initially high returns of 50-100% per annum dropped to 15-20% per annum from years 7 to 20.

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Also, even 7-10 year SIP returns tend to fall over the years. For instance, the 10-year returns from Nifty 50 fell from 22-23% for an SIP that started in 2000 to 12-15% for one that started in 2011.

Investors are often lured by the average returns over short periods and base their expectations on these. This is especially true during long bull runs, which cause investors to forget about market volatility and become overconfident.

Unrealistic expectations can cause you to miss your investment goals. Say you started an SIP in 2007 based on a fund's 30% compound annual growth over the previous seven years. The next SIP return for the next seven years was only 9%. In such cases, not meeting your target could cause you to take a rash decision