The Slow, painful correction in Stock Markets which started
in October 2021 got magnified by a huge fall of more than 1000 points for 2 days
last week. Surprisingly there were very few (negligible) panic calls/messages
on WhatsApp university.
4-to 5 years back whenever there was a sharp correction in
stock prices, I would be flooded by phone calls / WhatsApp messages/emails
from worried investors.
The constant and consistent education about the Power of Long-Term
Investment and that Volatility is a part and parcel of all asset classes and
inevitably every investor has to face is now ingrained in the DNA of almost all
my investors
Well, almost, but not all investors.
Some new millennial investors who started only post Covid fall and have never seen a Correction in True Sense were in for a rude shock.
Obviously, the Hand-Holding and education will take time
for them to ignore these falls but I know it’s a natural reaction and very
reasonable.
Earlier the obvious question which almost all investors
would ask and now only the very new investors ask is
STOCK
MARKETS ARE FALLING EVERY DAY, WHAT TO DO NOW SIR?
“If we are
facing in the right direction, all we have to do is keep on walking,” goes
a Buddhist proverb.
So, when the Direction is right....in this case...our
Direction is Wealth Creation and our vehicle is also right...that is the Equity Mutual Funds...then there is absolutely no need to keep looking at the NAV on a
daily or even a weekly basis.
Sometimes it makes great sense to be like an Ostrich and
ignore the noise all around.
I as a concerned MFD will be like a swan weeding out bad and choosing the best ones suitable as per profile, horizon, and asset
allocation.
You, as a good investor, behave like an Ostrich and ignore
all the noise around.
CORRECTION
IS NATURAL EVEN IN BULL MARKETS
The Sensex had a BIG RALLY from 3000 levels to 21000 levels
between 2003-2007. However, the rise was not at all linear.
The Sensex fell more than 10% 13 times in this period
and out of which 1 time it was a 23% fall and another time it was a 29% fall.
Just imagine if you had WITHDRAWN your money from the
Markets when these falls happened.
You would have missed the 700% RISE for panicking after a
10% fall!
These falls of 10% - 15% are an opportunity to invest extra
savings you may have, rather than getting panicky. And, as an Accumulator
of mutual funds, you should actually be HAPPY if the NAV is coming down.
BUT WHAT
IF THIS BECOMES A REPEAT OF 2008 FALL?
A very valid question and quite understandable.
I strongly suggest you read my article on https://srikavimoney.blogspot.com/2021/09/sensex-nifty-will-never-crash-like.html
In the last 2 years, the market has moved UP by only 60%
compared to the 700% rise in the 2003-2007 Bull Run. My interaction with
Investment Experts, Wealth Professionals,, Fund Managers, and my own
experience of being in stock markets for
more than 3 decades says that the 2008 Fall will never get repeated as at that
time the Markets rally was highly abnormal.
Still, if it happens, Markets would have reached the Bubble
stage and could be easily identifiable. RELAX!!
And, of course, people talk about the 2008 fall of 52% but no
one talks about the equally sharp bounce back of 75% the following year in
2009!!!
Those who held on to their investments saw a huge jump in
their returns. Quality Portfolios gave even a bigger return.
History shows that each Big fall is followed by a Bigger jump sooner or later.
Also, read my article https://srikavimoney.blogspot.com/2021/09/sensex-nifty-will-never-crash-like.html
THE HISTORY OF BIG FALLS & THE BIGGER BOUNCEBACKS:
Year 1992 -
Sensex down by 54% in a year and up by 127% in next 1.5 yrs.
Year 1996 -
40% down in 4 years and 115% in next year
Year 2000 -
56% down in my 1.5 years and 138% up next 2.5 years.
Year 2008 -
61% down in 1 year and 157% up in next 1.5 years
Year 2010 -
28% down in 1 year and 96% up in next 3 years
Year 2015 -
22.3% down in 1 Year and 25% up in next 7 months
Year 2020 – 38%
and recovered 47% within 6 months & by 100% in 18 months!
SO, WHAT
SHOULD I DO NOW?
Stock Price Correction (and NAV falls) are but a natural phenomenon
of equity markets.
Focus on the BIGGER PICTURE...Your Goals.
When Situations Change, nobody knows how to respond.
Thankfully, being in Equities for the last 31 years has helped me understand
how to respond to this type of situation exactly as this happened many numbers
of times in my professional career.
STOPPING Your SIPs at this point of time would be nothing
short of a Disaster. It will hamper your Wealth Creation Hugely.
Firstly, understand
why you had invested in the particular fund...
Does it still
make sense to continue?
Has my Asset
Allocation altered?
Have my goals
been reasonably provided for?
Are my goals
still far off?
Always look from the angle of your GOALS.
If your goals are still far away...it still makes sense to
continue to stay invested (and in fact, add more) in Small-Cap and Mid-Caps.
History has proved time and again that Midcaps and
Small Caps have given greater returns than Large Caps.
The volatility will only increase in the NAVs from here on.
But you need to think Long Term and worry least about the
fluctuations.
These fluctuations and falls of 10% plus are actually a blessing
for long Term Wealth Creation and an
excellent time to Increase your Equity Exposure especially if your Goals and
Asset Allocation allows you to.
As your well-wisher, I would ensure that you stay the
course and get out of this Temporary Blip without you suffering a stroke and
create REAL WEALTH.
If your goals are quite far...CONTINUE to STAY INVESTED.
If your finances allow, do SIP TOP-UP and even consider
investing in a One Time Lumpsum.
As Baron Rothschild said
THE TIME TO BUY IS WHEN THE BLOOD IS RUNNING IN
THE STREETS.....EVEN IF IT IS THE BLOOD IS YOUR OWN"!!!
REMEMBER there are lots and lots of positives that are
being ignored by mainstream media, the so-called Wealth Wizards who come on TV
1. The Crude is falling
2. The Russia-Ukraine war is nearly at the ending
stage
3. The Governments are fighting the Inflation worldwide
with proactive steps making sure inflation is reined in
4. Indian Govt is spending huge on Infra which will
have a cascading effect on the entire economy
5. The Tax Collection continues to rise rapidly
indicating the strength of the Economy.
6. The fall in markets has made the PE attractive
7. The relentless selling by FII is gradually
decreasing
8. Increasing equity participation by Indian Retail
Investors
9. EPFO money that will come to the Equity Markets
henceforth month after month adding to the strength of the Indian Markets
Every economist is clear that INDIA IS THE
CLEANEST SHIRT IN THE DIRTY LAUNDRY OF THE WORLD!
TREAT EQUITY LIKE YOU TREAT LAND AND GOLD
The biggest issue with Indian Investors is that when
GOLD prices fall, and their first reaction is...
GOOD...Now I can buy more
When Land Prices fall, their reaction is ….
CHALEGA...I AM
HOLDING FOR LONG TERM
But when the same investors’ mutual fund
or equities fall, their reaction is...
IS THE END OF STOCK
MARKETS...
Has my money gone??
Let me Take out whatever is
left!!
When anyone is looking at selling off Real
Estate and the land rates have fallen by 30%, their ONLY reaction is.....”WHY SHOULD I SELL NOW?? IT'S DOWN BY 30%... I
WILL WAIT”
but, the same investor, will not even
blink when it comes to selling Equities even at a loss!!
DO NOT ALLOW YOUR NOTIONAL LOSS TO
TURN INTO PERMANENT LOSS!!
In
investing as in auto racing, you don't have to win every lap to win the race,
but YOU ABSOLUTELY DO HAVE TO FINISH THE RACE.
And when it comes to
investment and wealth creation, you should be
a) Consistent
b) Unemotional
c) Logical
d) Have no
Biases
e) Have an
expert to guide you
A Guide will instill discipline
into your investment strategy and identify the right assets for your financial
goals.
DO READ MY LATEST BOOK WOW - WEALTH OF WISDOM
Equity is not to get rich fast. It is just that equity
compounds wealth at a higher rate than other assets. Be ready to get rich
slowly.
FINALLY,
If your Direction is Right....you just need to keep on
Walking. There will be stones on the way.... you will have to
negotiate them and move on. Don’t turn away looking at the number of stones.
So, when the Direction is right....in this case...our
Direction is Wealth Creation and our vehicle is also right...that is the EQUITY
MUTUAL FUNDS...then there is absolutely no need to keep looking at the NAV on a
daily or even a weekly basis.
Regards,
Srikanth Matrubai
