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

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Don’t fear

Posted by Muthu on April 25, 2017

The title of this piece should have normally come during corrections or bear markets.

Why I’m saying this when the indices are rising?

This is for those of us who may fear when market makes new highs.

First understand that 29,000 or 30,000 is only a mere number to measure the journey of Sensex.  Thirty eight years ago, it started at 100 and has multiplied 300 times over 4 decades.

At 100 or 1000, investors then would have had difficulty in imagining a level of 30,000. Now we may find 100,000 unimaginable. Sensex would touch this and much more in the course of its journey.  None of us know when.

All we know is that it would continue to keep going up in line with earnings with occasional corrections and gut wrenching bear markets.

To quote Nick Murray, declines are temporary and uptrend is permanent.

From the time it started, Sensex has made innumerable ‘new highs’ and ‘all time highs’. So there is no need to fear these terms. These are very common words in markets, more so in bull markets.

Also no need to keep anchoring to Sensex levels. There are broader markets, small cap, mid cap, sectoral indices and so on.

Sensex might have delivered hardly around 4% to 5% during last 10 years. But so many good mutual funds have delivered double digit returns. Many of you who are our clients for last 9 or 10 years can vouch for this. The return we get is based on the results of the companies we own, either directly or through mutual funds. Sensex return has nothing to do with the same. Sensex is still at the same level it was around 2 years ago. But your portfolio has delivered decent returns during the same period.

So stop anchoring to Sensex. It is only a very broad indicator. Many a times it has got nothing to do with your portfolio performance. So as much as you ignore bear markets, learn to ignore bull markets as well.

I’ve no ability to time the market. I don’t believe anyone else has the ability though many claim so. To me, you may buy when you have money and you may sell when you need money; at least holding for a period of 10 years in between. A bull or bear market can last for many years. There is no timeline for the same. Even in a long term bull market, it would be a roller coaster ride. Bear markets can happen suddenly as it happened early last year, only to be followed by a bull market subsequently.

Visualise a continuous uptrend in line with earnings over a long period of time (10 years+), with many rise and fall in between. This is the nature of journey and this is how wealth is made.

You’ve often heard me asking you not to fear bear markets.

The same holds good for bull markets as well.

Don’t  fear.

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