WHAT SHOULD I DO? SHOULD I INVEST IN MUTUAL FUND OR QUIT?
There is only gloom all around
If we look at the investment charts, returns from
Equity are at the bottom when compared to any other investments avenue, may it
be fixed deposit, Gold, or any other investments. News all around is bad,
whether domestically or globally. Nothing seems to working, neither govt in
India or govt in Greece. Every news seems to be bad news - high inflation, high
fiscal deficit, high interest rates, de-rating of India, slowing economic growth
and what not.
Equity market is mirroring what is happening all
along and has been wobbling between 16000 to 18000 index from last 2-3 years
now. It was way back in Sep-2007, when sensex touched 16000 for the first time
and from then, it is on the same index today as well. 5 years is not a small
time at all. It is testing investors nerves and now patience is breaking for
many retail investors. The participation of retail investors in direct equity
market is at record low of 7 years.
Why should I continue with these SIPs which are not making any money so far?
We have been regularly investing in the SIPs we started 3-4-5 years
back and are now getting impatient with the lack of returns.
We all look at what is the best
possible way to invest our hard earned savings. But, you should be very clear that I am
not stopping any of my SIPs. The reason is simple - keep reminding yourself that
I am not going to make the behavioural mistake which almost everyone does. I
don't want to be one among the crowd.
I know the rule of 80:20. Eighty percent people
hold 20% wealth and 20% people hold 80% wealth. There was a time in 2007, when
Dalal Street was celebrating Diwali and everyone was crazy about market.
Investors were breaking their FDs and investing in equities and today, the
reverse is happening. Today people are ignoring equities and investing in FDs
and Dalal Street is more or less a deserted place. Majority people did not make
money that time and even today they are not going to make it.
The reason is simple - people come to stock
market with very less time in hand. In 2007, mostly people invested in the greed
of short term gain and today also they are not investing in the fear of short
term loss. I am not going to do what the majority is going to do.
I am very clear that I am the person standing at
Counter 1. I do not want to be part of the crowd standing at Counter 2.If you give yourself
enough time and cut away from the crowd, you WILL be a successful investor. The
crowd rarely makes money only because they act as if they don't have time, when
in fact most of them really do have the time. If we are all able to understand
this basic fact, we will all become successful investors.
Why should I invest now, when the market scenario is so bad?
We all see around bad news about Indian economy, Europe recession, Greece Bankruptcy, lack
of Government Initiatives etc.Please understand there are business cycles, market cycles, good news and cheap prices never go
hand in hand - its always bad news and cheap prices that go hand in hand.Please understand that investing when there is bad news around is the best way to
make money in the long run. And investing when there
is a lot of good news around is also the time when prices are at their highest
and is therefore the time when you will more likely lose money than make money.
One simple fact that is what every farmer in our country understands, and every investor can easily
relate to :
A farmer sows his seeds under the blazing summer
sun, under very harsh conditions - before the onset of the rains, in
anticipation of rains. If he waits until it has already started raining, and
then sows his seeds, the seeds will get washed away and will not yield him any
crop.
Successful investing is similar to successful
farming. If you invest in bad times, in anticipation of good times ahead, you
will make money when the good times come. But, if you wait until the good times
have already arrived and then invest, your money will get washed away, just like
the seeds sown after the onset of monsoons.
show me something that can give me high returns, quickly
When I meet prospective clients, they sometimes
test me with this line : You are supposed to be an expert. Show me something
that can give me high returns, quickly. Don't talk to me about 5 and 10 years -
show me something that can make me good money in the next 1 year, not in 10
years.
You should understood one basic law of nature :
In Nature, every good thing takes time - only
devastation comes quickly.
I often find that clients settle down after this
and are more willing to discuss long term wealth creation strategies.
To conclude
There is no doubt that times are tough. For all
those of us who believe that there are only dark days ahead for us in this
profession, here is something for you to think about :
Once, Akbar asks Birbal, "What is it that will
give me sorrow in joy and make me feel happy when I am sad?". The wise Birbal
said, "It is the realisation of the true statement - this too shall pass"
