Wise Wealth Advisors

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

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Some more thoughts

Posted by Muthu on September 29, 2018

I got lot of responses to the piece I wrote last week. Thanks for your clarity and understanding.

September has been a very bad month for the markets. The indices do not adequately reflect the pain individual portfolios have gone through. Even good quality stocks have gone through brutal correction. Debt market has been no exception to this pain.

It is not possible to predict how long this fall would last and when markets would recover. But what we do know is that good years are more than bad years. Around 70% of time (in years) markets are positive and the balance 30% it is negative.

Markets, be it debt or equity, never produce linear returns. The returns are always lumpy. 80% of the returns happen in 20% of the time. There is no way to time this 20%. Staying invested all the time is best way to capture the market returns.

To avoid fear and prevent impulsive decisions, please don’t track your portfolio. Not looking at portfolio frequently is always a good habit more so at the times like these.

Going through roller coaster ride of volatility is the price we’ve to compulsorily pay for getting good long term returns. Markets have always been like this. This is very normal.

If we are sick of volatility, then we’ve opt for fixed return products like bank deposits. But the problem there is the returns hardly matches inflation and post tax returns can actually end up eroding our purchasing power.

If we want to have returns above inflation, build wealth, preserve and enhance our purchasing power; there is no way to avoid the pain resulting out of volatility.

Discipline and patience is the key. Patience has its origin in a French word meaning suffering. To be patient is to suffer.  No doubt, we find it very difficult to develop patience.

Patience is painful. But reward for the patience makes the suffering worthwhile.

10% fall once a year, 20% fall once in couple of years and 30% fall atleast once a decade is unavoidable. It is better to be prepared to face it.

Focus only on long term and stay the course.

Temporary fall in values are not losses unless we sell in panic.

Don’t panic.

This too shall definitely pass.

3 Responses to “Some more thoughts”

  1. Kiran said

    Nicely articulated, there are scenarios when portfolio does has substantial % of stocks like dhfl, Yes Bank or BajajFin. These stocks have come down between 30% & 60%, there is possibility a portfolio with such stocks may go down by more than 30%.
    In such case, do advise to hedge and protect the capital?

  2. Nithin lakshmanan said

    Sensible advise , same advise.

  3. anand kumar said

    “Patience has its origin in a French word meaning suffering. To be patient is to suffer.”- Loved it.

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