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

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Archive for the ‘Stock Market’ Category

Give time to get results

Posted by Muthu on June 20, 2019

For the last couple of years, we’ve stopped adding new clients unless referred strongly by any existing client. I don’t want to get into a situation where I’m unable to personally handle a client. Also I value my free time a lot. To be contented or grow further is an individual choice and I’ve opted for the former.

I’ve been interacting and sharing my thoughts for now close to one and half decades and some time get impatient if the core philosophy is still not understood.

Whether you invest in an equity or hybrid fund, it takes time to deliver. The expected returns of 15% or 12% happen only over a period. The returns would be uneven as well. There are years of positive returns, negative returns and no returns. If the funds you’ve invested are capable of producing 15% year or on year, the entire population would only opt for equity investing. You want the results of equity without paying the price for it. The price to be paid is accepting and undergoing volatility.

There is no way you’re going to enjoy the fruits without allowing the tree to grow. If it is going to take 10 years for a plant to become tree and yield fruits, no amount of frustration or anxiety is going to advance the yield. In fact, these negative emotions are capable of destroying the tree itself.

All our long term investors are seeing excellent results. Those who invested during the last few years are either seeing average or below average results. No amount of mental anguish is going to change the results. All that is required is patience. Every investment is prescribed with a minimum time frame for holding. Unless you give that time, you’re not going get the results.

If you cannot accept volatility and develop patience, equity investing is not for you. Those who want quick money end up making no money. Either you give time to get results or opt for assured return product like bank deposits. If you aspire for 15% kind of returns, you need to pay the price of accepting stomach churning volatility. Else you need to accept and live with 7% kind of assured returns.

Also came across few retired clients of ours taking up trading. Trading requires enormous knowledge, discipline and skills. It cannot be a hobby or time pass activity. If you want to trade, equip yourself first for the same. You cannot become a trader overnight. Be it investing or trading, it needs years of hard work and discipline. Also avoid intraday trading. It is not for you. There are very few winners there and it is extremely risky as well. Intraday trading is the easy way to lose hard earned money.

As you’ve become seasoned investors, when you refer a client next time, please see if they have basic emotional maturity to learn and follow long term investing. If not, request you not to send them to me. Without patience and discipline, it is impossible to create wealth from markets.

Posted in Muthu's Musings, Stock Market | 2 Comments »

Extreme patience

Posted by Muthu on February 12, 2019

To make money from equities, not just patience, but extreme patience is required.

Even last piece I wrote on patience. I’m continuing with the same. Why?

Patience is the most difficult virtue to develop. As I’ve said before, the origin of the word patience means suffering. To be patient is to suffer.

By nature, we try to avoid pain. But nothing worthwhile is ever achieved without going through pain.

Markets may not give any returns for three years and give three year returns in the fourth year.

Gains are never linear but always lumpy.

Markets can test our patience to the extreme. Only those who are able to bear the same are rewarded well.

Investors who are impatient seldom make money from markets.

Those who are with us for long are still seeing good returns.

Those who have become clients in the last few years are staring at bad returns.

Things will definitely change. Over a ten year period, the results would be good.

I cannot predict when markets would start going up. All I know is, in a decade, you would have more good years than bad years and the overall results would meet your expectations.

I can motivate and handhold you. But it is you who need to develop the required virtues.

Stay the course with faith. You would be amply rewarded.

Posted in General, Muthu's Musings, Stock Market | 1 Comment »

Need of the hour is patience

Posted by Muthu on February 4, 2019

“The biggest thing about making money is time. You don’t have to be particularly smart; you just have to be patient.”- Warren Buffett

Though broader indices may not say so, for all practical purposes, for majority of stocks we’ve been in a bear market.I saw a fund manager presentation. Only 21% of BSE 500 stocks ended positively in 2018. The rest 79% have given negative returns.

Debt market has also not been doing well for more than a year.

So be it equity funds or hybrid one like balanced and MIP, returns have been abysmal.

We know that 70% of the years, it is bull markets and only the balance 30% is bear markets. Still time moves very slowly in bear markets. Our patience and discipline are severely tested.

It is normal to be impulsive and impatient. That’s why it’s very difficult to make money in the markets. Only the few who are disciplined and patient ultimately makes it big from the markets.

All you need to do now is to simply the stay the course. Looking at portfolios can be painful. So I would suggest not to look at them till market recovers. Rain or shine, good or bad, I send yearly reports with my comments in April every year. It is generally a good thing to look at your portfolio once a year. More so in the negative market conditions like this.

There are many people who predict what would happen before or after elections. It is simply their opinions. May or may not happen. You know that I don’t make short term predictions.

The government is aiming India to be a $10 trillion economy in 2030. We’ve lot of foundations already in place. India is definitely a structural long term growth story. When we move from $2000 per capita to say $8000 per capita over next twelve years or so, lot of companies would do very well. As an equity holder, you would be reaping those benefits.

Keeping bigger picture in mind is the only way to withstand the short term pain. You’ve invested in equities with belief in a better tomorrow for the country and corporate India. Stay with that belief. I don’t know what would market do based on pre-poll opinion polls and election results. It is both difficult to predict events and market reaction to those events. All I can tell you is, whenever you’re in a bear markets, a bull market is always around the corner.

Maintain discipline. Stay patient. All would be well.

Posted in Economy, General, Muthu's Musings, Stock Market | Leave a Comment »

Less pain and some gain

Posted by Muthu on December 16, 2018

I’m writing to you after 50 days. I wrote to you multiple times in September and October when markets had a steep fall.

After I wrote last piece, markets have been in recovery mode.

This is true for both equity and debt markets as well.

Overall this year has been a rough one.

As I repeatedly point out, 10% fall once a year, 20% fall once in couple of years and 30% fall atleast once a decade is unavoidable.

For many portfolios, this is a year of 20%+ correction.

Nobody loves to see the portfolio value going down. But this is the price which has to be paid for long term growth.

In most aspects of life, nothing worthwhile can be achieved without some amount of pain and sacrifice.

The very fact you set aside money today for investing shows that you sacrifice some part of today for a better tomorrow.

In equity investing, seeing your wealth going down, though it is temporary is the pain you’ve to go through for building long term wealth.

The only way to avoid pain is not to invest in equity at all.

By avoiding pain you would not have any gain as well.

You’ve all chosen equity fully understanding the pain and sacrifice that needs to be undergone on the journey towards achieving long term life goals.

Good advice never changes however repetitive and boring it sounds.

Just continue to stay the course remembering the long term results are always good for those willing to undergo short term pain.

Posted in General, Muthu's Musings, Stock Market | 1 Comment »

Pain continues

Posted by Muthu on October 27, 2018

Your portfolios are going through pain due to this bear market. There is no way to avoid this pain. In fact this is the unavoidable price you’ve to pay for getting good long term returns.

My continuous mentoring is to make you emotionally ready and bear with such pains as and when they occur. All good things in life never come without some pain. We’ve often heard that no pain no gain.

Though it is difficult to predict, some generalisations are possible. Bull markets are usually long and bear markets are short. Around 70% of years markets perform positively. This year is one of those 30%.

If returns are linear and predictable, everyone would get rich. But we know only 1% can be in the top 1%. If you want to build wealth through markets, need to accept this roller coaster ride and lumpy returns.

The question naturally comes to mind is how long this bear market would last. If we can predict that successfully, we can time the markets and completely avoid pain. By now, being our client for many years, you know this is not possible. Markets can recover in few months or may even take a year or more. We always advice not to time the market but invest when you’ve money and redeem when you need money ensuring a minimum time period of ten years in between.

Good advice rarely changes and so I’m repeating what I always keep repeating. How you behave in bear markets decides your investing fate. If you sell during bear phase, you’re converting notional loss into permanent one. If you stop SIPs, you lose the opportunity to acquire units at lower price which would actually boost your long term returns.

Only those who have control over their emotions get and stay rich. For others it is a loser’s game. We want you to be amongst successful tiny minority.

What you need to do for being successful? Just bear with the pain and stay the course. That is all you need to do and this one thing differentiates between success and failure.

Remember bear markets are always followed by bull markets. This is the time to accept and live with pain for long term gain.

Avoiding pain is avoiding growth.

Interestingly accepting pain actually reduces it.

This is time for you to experiment and see.

Experience coming out of experiment is wisdom.

And it is the wise who ends up successful.

Posted in General, Stock Market | 4 Comments »