How to invest now
These are surely difficult times for the investor now. Looks like the Titanic times. There are kids telling you there is a ice berg. However you as the experienced captain of your ship do not know whether to say “Full steam ahead” or to be cautious. You have also read the Titanic story.
Well if you have been in the market for a few decades you realize that the market will go through its ups and downs. All of us wanted Na Mo to clean the banks (I have been accusing him of not moving fast enough) so now he has allowed RR to do it. Acts of commission and acts of commission both have to be lauded / criticised. So it is spine chilling to see that even the SIPs which were started in 2014 are now in the red. If the fall continues you will have to have stronger resolve. You will find stupid nay sayers telling you how you were better off in PPF or in bonds. If you are an investor for the next 10-20-30 or more years you need to be HAPPY at the amazing buying opportunities.
Will the market go down further? I do not know.
How much further down will it go? I do not know.
How long will it stay there? I do not know.
If I were a crystal gazer I should have asked you to sell when the index was 30,000. Since I did not know that it would come down to 23500, again the only thing that I can tell you is I have no clue when it will go back to 30,000. However I still stick to a figure of about 50,000 by the time Na Mo is ready to hang his boots as the Captain of the ship. Yes there will be pain. FII money will stay out of the banking stocks till the full clean up is over. Believe me, the cleansing has just started. It will be painful. I only hope that a few directors, managers, and auditors end up in jail along with the crony capitalists. Vijay Mallaya seems to be standing for ‘all that is wrong with banking image’ but let me tell you there are other bigger criminals in the chain. VM is not just a poor manager, but he also manages his image badly!!
I know people who have started buying in small lots, I know those people who are continuing their SIPs, and I know some DIY investors who have started investing more. In 3 months time we will know who is smart, and in 3 years time we may have forgotten the fall. In retrospect we may say “OMG I should have sold at least at 23,500” or “OMG it was such a Golden opportunity to buy more”. Honestly, I do not have an answer about what to do. The cleansing starting in the banking will surely go and hit many start ups – who will find valuations falling, and therefore running out of cash. That of course is the worst thing for any company, let alone a start up.
Falling crude prices have started an exodus of families from the gulf, and that could only worsen. The US is doing well, so the IT giants and the minnows will do well, damn the visa issue. Some of the commodity prices could / will recover, and gold will perhaps gain some traction. The US $ will keep strengthening, and RR might have to INCREASE interest rates to protect the currency. If that happens YOUR DEBT PORTFOLIO WILL FALL IN VALUE. You really need not worry if you are invested in bonds, but the bond portfolio of yours will fall. Again you need to ride out the volatility.
From 1979 till today has been a long journey for me. 2 Prime Ministers were killed. 4 American presidents spent trillions of dollars in different wars. Interest rates went up, went down, stayed at zero. Today in 2 important economies it is below zero. Scams happened internationally and domestically. Elections were fought. Fairly and Wrongly. Technology surged ahead. Uber, Facebook, Ola, Snapdeal, Flipkart, …were ‘invented’ not ‘discovered’. Markets went up and markets went down.
Go to an excel sheet put 100 in 1979 and 23400 in 2016 and calculate the IRR add a reasonably big sized number for the compounding effect of dividends. Then read ‘past performance is not an indicator of future performance’. Then relax.
Take a call depending on your understanding of the market.
Take a call depending on your ability to keep calm.
Take a call depending on your future time in the market.
Remember Meditation is learnt, never taught.
Sansvk
Good thoughts.
Having seen the 2008 fall from the sidelines, now seeing a big fall with money at stake is again a good experience. People generally forget the recoveries that happened in the past and tend to focus more on the falls.
Mukul Singh
You are right subra as usual, this is the time for value investors, only the momentum guys will panic
Balaji
It used to give me some comfort that my monthly SIPs of nearly a lakh/month would secure my retirement & my daughter’s financial future. But then I read this article by Vivek Kaul & wonder if a combination of FDs & real estate would better secure my future. The link is https://www.equitymaster.com/dailyreckoning/detail.asp?date=11/13/2015&story=3&title=Does-the-Sensex-really-give-a-return-of-16-per-year-in-the-long-run
My only hope is that the rolling return is decoupled from the absolute change in the indices. What view do you hold on this?
LuckyOye
Its interesting that people look at the ‘big picture’ only during market crashes! During market booms, *nobody* looks at the big picture, instead we’re all enamored by the new found wealth! And busy dreaming what all we can do with it!!!
Reminds me of the situation why we remember and pray to God only during bad times…and during good times, we don’t have to, since, well, obviously our prayers have been ‘answered’!
baljit
sir,
excellent…..
but can u b more specific than sercastic…
regards
i think u want to help readers of your blog….
Ravichandar
Hi Subbu Sir !
I am a very silent follower. I am a 25 year old, guy working at an IT company. I came to the market just after yuan devaluation (6 months back), When i came in, I always looked for a big fall since most of the experienced investor faced many falls from 1979 to till now. why i am saying this is, only these kind of falls can teach us the most important lessons and now my portfolio is down by 15% and always had the regret of not knowing about MF and Equitites few years back like some well educated and well informed sons and daughters of HNI Parents….