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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Fear of Fall

Posted by Muthu on March 26, 2015

Markets touched 30,000 points early this month and have corrected nearly 10% over last 3 weeks. Sensex closed at 27,457 points today.

This is attributed to Yemen crisis and some other issues. If you recollect, three months ago market had a similar fall and touched 26000 levels. Russian crisis was then suggested as the predominant reason for the fall.

I want to share with you today what I wrote 3 months ago. This reasoning holds good for previous fall, current fall and future falls as well. Don’t worry. I would always be there around to reassure you in the moments of sharp volatility and fear.

Please read on:

For those of you who are our long term investors, this kind of panic situations are not new. We face almost one once in a year or two. In stock markets, you are always given frequent tests to check your conviction levels. Only investors who pass these tests are given the 18% kind of returns the market offers to those who stay invested.

Six months ago, we shared a CRISIL data as to how those who stayed invested in equity funds for 17 years got an annualised return of 22.6%. Those 17 years had innumerable panic like situations; both domestically and globally. But those who sat patiently were hugely rewarded. Indian markets have given 270+ times returns over last 3 decades when both globally and locally we went through one crisis after another.

Panic and euphoria; booms and busts are perfectly normal. This is how it has been and this is how it would be. Moreover, for good or worse, we are all getting better informed. Even 10 years ago, we didn’t have the kind of information we posses now on an everyday basis; be it RBI policies, global crude prices, inflation figures, changes in global markets, commodity prices, fed policies etc.

Some experts opine that this spread of information has shortened the span of cycles. The ups and downs in the market have become more frequent than ever. Increased volatility is the price for instant information. 10%+ corrections are frequent. 20%+ corrections happen on a regular basis. In your investing life, you may even see 50%+ corrections three of four times. This is how it would be.

We all by now know and have even experienced the benefits of staying the course despite all the negativity. Moreover, India is one of the few countries which are in an advantageous position now globally. In short term, like everyone else, we would be impacted by global happenings; as sentiments drive markets in the short term. In the long run, we are in a structural growth both in terms of economy and markets; as fundamentals drive markets in the long term.

Many of you tell me that you no longer need constant reassurances as you’ve understood the benefits of staying the course and investing for long term. I’m glad to hear that. However it is my responsibility to constantly reinforce the power of compounding, role of time in investments, sitting patiently, investing regularly, investing for long term etc.

You’ve heard this John Bogle’s quote from me many times. Please listen now for one more time.

Stay the course. No matter what happens, stick to your program. I’ve said ‘stay the course’ a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.

Don’t panic. Stay the course.

4 Responses to “Fear of Fall”

  1. Srinivas said

    Thanks for the opt-repeated but great advice.
    Can you do a article on what to do if i have lumpsum money that i do not need access to for > 7 years? Do i need to invest it at one go or do a STP? If so why?

    • Muthu said

      If the investment tenure is 10 years or more, we don’t suggest STP but only lump sum. STP would be looked into when valuations are very high and stretched, which is not the case now.

  2. ratnakumar72 said

    Well done,,,off course we all aware of these type of corrections,,,but your timely advice will give us enoromous inspiration and strength to not bother about these corrections..many thanks once again….

  3. jayantfine said

    We all want to see GREEN colour for our stocks every day , but whenever i see RED colour , though the market is 27500 today it will again touch 30000 and more …….

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