Wise Wealth Advisors

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

  • Blog Stats

    • 1,059,847 hits
  • Enter your email address to follow this blog and receive notifications of new posts by email.

    Join 1,115 other followers

  • Follow me on Twitter

Rise and fall

Posted by Muthu on July 7, 2018

Broader markets have been going through deep correction in 2018. This has impacted the equity funds return. Rising bond yields have impacted the debt funds return. Both combined have impacted hybrid (balanced, MIP) funds return.

For those of you who have been investing for long time, portfolio still shows decent returns.

For those of you who started last year, the returns are either marginally positive and in many cases negative.

Markets are always cyclical. It never keeps going in one direction. During good periods, we think bad periods would never come and vice versa.

Rise is always followed by fall and fall is always followed by rise. The long term returns we earn are after going through these repeated cycles.

There is no way to time these cycles. Understanding cycles does not lead to timing the same.

If we expect 15% annualised returns from equity funds over next 10 years; 80% of the returns would happen in 20% of time. Need to stay for entire 10 years to ensure that we don’t miss this 20%.

Long term returns are obtained after years of high returns, low returns, no returns and negative returns.  We cannot focus on one and avoid others. If we need to participate in years of high returns, need to stay invested in years of negative returns as well.

We always ask you to take a minimum 10 year outlook for equity funds, not less than 6 years for hybrid equity (balanced) funds and at least 3 years for hybrid debt (MIP) funds.  Only liquid funds can be held for short term without any prescribed minimum period.

By our regular interactions, you are aware of all these points. Still it is my duty to keep reinforcing the same periodically.

Bull markets would be followed by bear markets would again be followed by bull markets ad infinitum. The cycle continues to keep happening. Need to go through both bull and bear markets for good long term returns. One positive aspect is there are more good years than bad years. Markets are up generally 70% of the time and down 30% of time (in years).

If looking at portfolio pains you, stop looking at the same.

Investors who review portfolio only once a year has better chance of staying the course. If you panic and redeem in bear markets, you would not be able to enjoy the returns of bull markets.

Only those who own investments in bear markets are those who are rewarded in bull markets.

Investing legend Andre Kostolany said beautifully “Who does not own shares, when their prices drop, will not own shares when prices soar.”

Be intelligent and stay the course.

4 Responses to “Rise and fall”

  1. cparmar09@gmail.com said

    I love to read the communications from Wise wealth advisors. But just wonder how a layman can decide whether particular stock is worth holding? I hold some good names eg Tata motors, which are in -35% loss!!! I trusted the company n management but its getting eroded day by day. How do you approach such scripts?

    Thanks Chirag

    Sent from my iPhone

    >

  2. Yogesh said

    Sir can you please guide on quantity and quality of equity mutual funds one should hold. More specifically if a person in mid thirties who is looking to invest in equity mutual funds to create retirement corpus after 20 years.
    By quality I mean large / small / mid / multicap/ index / thematic funds.
    Thanks

  3. […] Rise and fall (Muthu) […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

 
%d bloggers like this: