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

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Don’t panic. Stay the course.

Posted by Muthu on August 24, 2015

I wrote to you this piece in December’14 when the Sensex went to around 26000 levels due to Russian crisis. I again wrote you the same piece in March’15 when Sensex touched 27000 levels due to Yemen crisis.

Today, at the time of writing in the morning, the Sensex is around 26500 levels. Now the panic is due to Chinese crisis and the fear of global slowdown.

So I would like to repeat below what I said on the previous occasions.

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 around 270 times returns over last 3.5 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.

3 Responses to “Don’t panic. Stay the course.”

  1. bvmallikarjun rao said

    m investing via SIP in equity mutual funds from last 5 years from my experience i can say what ever written in article is true. actually volatility is better for SIPs. so that we may have good averaging in long term.

  2. ratnakumar72 said

    Hats off to you for your excellent timing…..Investors need this type of motivative words in this panic situations…Really Thankufull to you for inspiring us by reminding the benifits of longterm investment and not panic in this type of situations,,….

  3. Siddhartha said

    With the fall of 1625 points in Sensex, my friends started panicking.
    They started commenting such as:
    ~ Share market ki waat lag gayee
    ~ Recession is again knocking
    ~ All world market are at low
    ~ Rupee at all time low at 66.3 …….etc

    As I have been following your blogs including this one, I kept motivating them saying:
    ~ Don’t panic
    ~ Don’t redeem
    ~ Stay the course
    ~ Be patient
    ~ Sharp falls like this are not uncommon
    ~ Market would recover soon……..etc

    They pacified. All thanks to your posts. They serve as great inspiration for us, especially in such situations….

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