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

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Accept short term pain

Posted by Muthu on February 14, 2016

Markets falling heavily during recent times would not have escaped your attention. This news is part of main stream media as well. I’m happy and grateful that you are all calm and staying the course.

Indian economy is in a better shape than it was few years ago. We’ve an excellent political leadership which is working for the betterment of the country. We’ve a visionary RBI governor who is in the process of cleaning and reforming our banking system.

The fall in the recent times is more of due to global scenario. India, though doing well, is impacted by fund outflow due to selling by FIIs. This may continue for some more time.

Lower crude prices and fall in other commodity prices is a blessing for India. If it continues so, we would be able to build our infrastructure at lesser cost.

Government and RBI are working in such a way that there would be short term pain but long term gain for the economy. The results of the reforms would be higher growth rate in the years to come. I would not be surprised if we are able to grow at 9% in the years to come.

The structural changes happening in the economy and banking system would pave way for many years of high growth.

Stock prices are slave to earnings. Earnings growth was expected to pick up this year and is getting delayed. Many opine that, in next financial year, due to lower base, we should expect an earnings growth of 15%. Once earnings pick up, markets would be able to sustain itself and grow. It’s earnings growth which makes or breaks equity.

For the reforms and infrastructure development carried out been 1999 to 2003, we saw an extreme high growth of earnings from 2003 to 2008. We may expect a similar high growth trajectory in next few years.

Modi and Rajan are working for a fundamental and structural change in the economy and banking system. You would have seen PSU banks declaring huge losses due to cleaning up of books.

When government and RBI wants to go through short term pain for long term gain, we the investors should also develop a similar attitude.

During bear markets, we get more units for the monthly investments we make through SIPs. As we always say, in stock markets, the ups are permanent and declines are temporary.

We would continue to make new highs in the coming years and decades, as the earnings keep going up. As I always say equity is for you only if you have faith in the future.

Despite some temporary setbacks, I’ve every reason to believe the Indian economy and corporate India would be in upward trajectory for next few decades. If that is the case, the markets cannot be far behind.

Avoid financial media, don’t look at portfolio and just stay the course. You would do very well over next few years.

Accept short term pain for long term gain.

One Response to “Accept short term pain”

  1. rakesh ojha said

    http://www.marketwatch.com/story/how-missing-out-on-25-days-in-the-stock-market-over-45-years-costs-you-dearly-2016-01-25?link=MW_home_latest_news

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