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This too Shall Pass… Have Faith in Equity Markets

Our memories are generally short lived; everyone knows that market has moved from 3,400 level in Jan 2003 to 21,000 levels in Jan 2008. In 5 years, it multiplied whopping 6.17 TIMES. But the market has corrected more than 10%, 13 TIMES, of which 24% and 29% is the highest.

Sensex was 6,194 on January 14th 2004 and it has fallen to 4,644 on 23rd June 2004. In the six month period market has fallen nearly 25%. On 3rd January 2005, Sensex again back to 6679 which 43.8%. If you look at 1 year between 14/1/2004 and 3/1/2005, market is still 7.8% positive. It clearly demonstrates that sharp fall and rise or inevitable in the BULL Market…

This was considered to be the earlier bull market. Sharp fall and rise are the innate behaviour of the bull market. As far as Indian markets are concerned budgets are not received properly and ILFS, DHFL have some serious problem and lot of bad news floating around about global market. In a nutshell, both the markets and the investor confidence is all time low.

I read a quote from WhatsApp sometime back

“World is waiting for Markets to Crash, & Market is waiting for your PATIENCE to crash.

Those who made money in equity markets are the one who are calm in the difficult times and those who invested their little surplus during that fall. Many of you at the time of staring, I will wait for minimum 3 years and this is for long term 10 years plus, but one sudden fall or sustained bear market for the past 18 months is not able to digest and the investor confidence is all time low now.

Equity is nothing but investing in Business, no business has the intention to start to make quick bucks and get out. Business is for ever and it is generation after generation. Volatility is the basic ingredient to all the businesses.

Future is always unknown, but looking always fearful for every dip and looking every dip as either opportunity or enjoy calmly will make you adventurous, it is purely on the individual hands. That is why the pundits used to say investment is all about 99% emotion and 1% intelligence.

Everybody knows one can create huge wealth by simply investing in a mutual fund for 10 plus years, yet the penetration is only 4% just because, many are not willing to digest the fluctuation and wrongly understood fluctuation is risk. In fact, fluctuation or volatility is your friend.

As an advisor I can keep giving you all the reassurance, but I can’t transfer my conviction about the equity market which can potentially generate good return over long term, unless one understand without emotionally attached to their investments.

I always remember the saying “THIS TOO SHALL PASS”, have faith in equity and our country, when the entire world is looking India as an opportunity we are not willing to accept.

In this financial year, FII (Foreign Institutional Investors) sold nearly 4,068 Crore, where as DII (Domestic Institutional Investors) bought 20,222 Crore in the market. This is a very healthy trend that our markets are not ruled by only FIIs which people used to say it earlier.

I don’t think anybody who take loan and invest in mutual fund, it is generally their surplus which will not be required in the immediate future.

Do not take loan to make investments, is the first lesson for investing, those who take home loan often forgets.

Whereas when you buy property you are taking loan and invest, hoping that it will generate huge returns. In the real estate you have to pay month on month for your loan, here there is no commitment and its only surplus. If taking loan will eventually give returns for the longer period, why housing financing companies are giving loan to the individual they can also invest more if it is true!!!

Those who stay invested for the next 10 years will make FORTUNE, but one needs belief and conviction… I can take the horse to the pond, but I can’t make it to drink…