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.

It’s more than a month since I wrote my last piece. I try to write to you twice a month. Since good advice seldom change, sometimes I run out of ideas to write. What I’ve been doing all along is to keep conveying the same thing again and again in different words and examples. Good advice is repetitive and boring. But the rewards are exciting.

First some good news. SEBI has reduced the cost of investing in mutual funds. If cost goes down, your returns go up. This is the second such cost cutting in the last few months. Though it reduces our income, in the long run, what is good for you is definitely good for us as well. This change negatively affects those advisors who have been selling NFOs (New Fund Offer) and keep churning the portfolio to earn more commissions. As you are aware, we never ask you to invest in NFOs and rarely make changes to portfolio. As Warren Buffett says, integrity is the safest way to do business.

Markets have done horribly this year. Not only equity even debt has done very poorly. So be it equity or balanced or MIPs, all have performed negatively. Though I can give many reasons, what is important to note is this is the very nature of markets. It never progress linearly. Long term returns are made up years of high returns, low returns, no returns and negative returns. Last year was a year of high returns. This year is the year of negative returns.

Returns from mutual funds (mark to market products) are always lumpy. What matters to us is long term returns and not each year returns. There is nothing we can do to remove the volatility or lumpiness. This is the way market functions. You are rewarded with good long term returns only if you can accept and maintain calm during such volatile periods.

One advice I can give you this year is not to look at your portfolio frequently. We are all emotional creatures and negative returns triggers fear and create an impulse to quit. I’ll share each one of your portfolio in April 2019 along with my review. Though you all have online login facility, I would strongly suggest not looking at your portfolio. In bad times, we think good times would never come. In good times, we think it would last forever. The reality is market is cyclical. By going through multiple cycles, we get good long term returns which market provides us.

In a growing economy like India, progress is permanent and set backs are temporary. Don’t miss long term progress by getting bogged down with temporary setbacks.

Don’t look at portfolio and stay the course.

All would be well.

Many businesses die within first three years of starting. Even among those who survive, very few thrive. Most simply survive. I read that only around 25% of listed companies create wealth. Only a single digit percentage of companies create huge or mega wealth.

It looks like failure is the norm and success is an exception. But we always think otherwise.

Be it sports or movies or politics, the same thing holds good.

Only 1% of us can be in the top 1%. Not all of us can create wealth in stock markets. Most of us would end up average in investing.

Traits are labelled based on outcomes. If successful, we call it perseverance. If failure, we call it stubbornness.

When we realise failure is the norm in many aspects of life, we would be compassionate towards both ourselves and others.

Setting aside for the moment role of luck, we either need to do things differently or do ordinary things extra ordinarily for success.

Impulsiveness and impatience are very common among investors. That why most of them never make any money in markets. Not only that many lose as well.

Discipline and patience would help you do ordinary things extra ordinarily. Though success is never assured, this increases the probability.

All our effort is towards making you do ordinary things well and be different from most of the investors.

If you realise failure is the norm and success is rare, you would understand why we ask you to do what we ask you to do.

Many think stock markets or trading is easy. This is the only field where we take outcome for granted without adequate outer and inner preparation. As Buffett says, in every market cycle, a new set of investors learn some very old lessons.

It is better to have some self doubt, appreciate uncertainty, prepare adequately, do things differently from an average investor and most important do ordinary things extraordinarily. This increases our chance of success and hopefully we won’t fail.