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

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Bear Market

Posted by Muthu on January 20, 2016

It’s look like we are in a bear phase. Markets have fallen close to 20% from the highs reached in March 2015.

Bear markets are very normal and is part of the cycle.

There is nothing you need to do except staying the course.

Please don’t keep looking at your portfolio. It may lead to impulsive unwanted reaction.

Please continue your SIPs. SIPs are designed in such a way to make you invest during corrections and bear markets. Anyone would invest in a bull market. It takes lot of understanding and conviction to invest in bear markets. SIPs take care of that automatically.

You may also top up if you have any surplus money which you would not need for next 10 years.

Wealth is created because we invest in bear markets. We just don’t realise it then.

It’s time for you to self check whether you’re able to practice whatever you’ve been learning so far.

All my teaching is to emotionally make you prepare for deep corrections and bear markets. As always, we would hand hold you during these difficult times.

In tough times, we tend to think good times never come and in good times, we tend to think it would last forever.

Every asset class is cyclical. There is no such thing as permanent bull or bear market.

Stick to the investment discipline both in good times and bad. This is the key to wealth creation.

Remember markets are up around 70% of the time and down during the remaining 30%.

You need to stay during this 30% to enjoy the 70%.

During your investment journey of few decades, you would continue to see both bull and bear markets.

In the long run, the markets are in permanent uptrend. So declines are temporary and are the period to hold on to enjoy long term benefits.

As Jeremy Siegel says “Volatility scares enough people out of the market to generate superior returns for those who stay in.”

Morgan Housel also adds that “Over time, the investor willing to endure the steepest emotional roller coaster will win.”

Many investors would now sell due to panic and also stop SIPs there by losing opportunity to buy at lower prices.

They typically buy high and sell low.

That’s why most of the investors never make any money from the markets. Not only that they also lose money.

I believe that I’ve been grooming you to behave otherwise and be among a small percentage of investors who create huge wealth out of equity.

Other than our primary residence, nearly 90% of our family wealth is in equities. We also invest every month through SIPs, just like you.

We follow what we preach and we’ve achieved financial independence only because of equities.

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.”

4 Responses to “Bear Market”

  1. anil suman said

    Hi Sir, iam following your articles from last 6 months, my thought process has changed alot by following your blogs. Thought the market id down now, i am feeling safe and confident, Infact, on each day market falls 1% or more, iam investing.
    Thanks alot for your guidance


  2. rakesh ojha said

    Muthu, SIP is a great approach and is likely to beat every one. However, there are periods of great upheaval every several decades or even centuries. There is lot of data that we might be in such a phase. I mean global markets. Global markets may be facing bear markets not seen in a century or so. In times of such upheavals it might be prudent to get risk averse otherwise severe draw down of portfolio is likely. India is very tightly linked to global capital. FII own 25% of stocks by capitalization. They owned 0% in 1992. Global chaos will definitely effect India in a big way. Please find brilliant analysis from John Hussman……. My view on “this time” is clear. I remain convinced that the U.S. financial markets, particularly equities and low-grade debt, are in a late-stage top formation of the third speculative bubble in 15 years. On the basis of the valuation measures most strongly correlated with actual subsequent market returns (and that have fully retained that correlation even across recent market cycles), current extremes imply 40-55% market losses over the completion of the current market cycle, with zero nominal and negative real total returns for the S&P 500 on a 10-12 year horizon. These are not worst-case scenarios, but run-of-the-mill expectations.
    Also from brilliant Albert Edwards,

    Conclusion: India might be facing most severe and prolonged bear market with deep draw down and not usual 20-30% down bear market.It will effect asset rich individuals more negatively. If sensex drops to 20,000 we might be facing a lost decade already….result of severe over valuation in 2007/2008 market top with PE of 27.

  3. rakesh ojha said

    more on why we are in a dangerous global bear market which will ravage India too.

  4. Lina said

    i had deposit 25,000.00 on 24.04.1998 and my date of maturity was on 24.10.2001, when i went to check with the person they said that the company is close. i would like to find out how we will get the money back from ANUBHAV AGRO or who to contact.

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