When markets are doing well, people put in MORE money, and INCREASE their expectation of what the market will do for them. In one day if the market goes up say 4% more people will call and ask…’I have ..X.should I invest that too’ . This is such a sitting duck question that the IFA is bound to say ‘Yes’ put it in ….fund it is a large cap fund’ or ‘mid cap fund’….as is appropriate.

People do not understand compounding is of course a given..so people will suddenly assume a 4% every day for 200 working days.

In a bear market the question is different…”Should I still be investing in equities?’ ‘Should I do a lumpsum..or a SIP over 5 years. Expectations are less.

So what happens to a person who starts investing in a bull market?

He is tired soon. Over a 3 year period he gets (if he gets that far, I mean). Then his father, uncle, friend…or the great pink papers..publish an article ” A 3 year sip has given less returns than PPF”. So he gets more frustrated. He stops his SIP.

Then there is a bull run..he wonders what to do.

Whereas the guy who starts off in a bear market, has no expectations. He is hoping to get a return better than bank – and do the tax arbitrage on funds vs fixed deposits. Suddenly the bear market comes to an end..and his made to look smart. He now pushes up his SIP amount. Suddenly his investments of Rs. 6L looks like Rs. 11.22 lakhs. He is impressed. He honestly, does not care about IRR as long as the amount accumulated is almost double his contribution. So 50,000 per month becomes 2 sip of Rs. 50,000 per month .

Psychologically, it feels good when the money invested looks big – much bigger when you are a late starter.

So if you are a long time investor and are hit by a bear market what should you do?

1. Switch off the connect to the equity markets – television, internet, …all those places which scare you with amazingly stupid and unnecessary, unscientific end of the world stories. Use your own brain. I am convinced that investing is a low IQ activity, but sitting calm over long periods of time is an amazingly difficult job to do.
2. Go off Equity related networks: some amazingly stupid FB groups, Wassup groups exist. Full of jerks scared about equities are likely to scare you too. Get into groups which have created wealth over long periods of time. I am in some such FB groups for having fun. Since I am focused on what I want, I hope not to get into ‘discussions’ and ruin my life.
3. While going to bed think of the next morning being great@ see the impact!
4. Be grateful to God for what you already have.
5. Take stock of your inventory – your market value, etc. see how well  you ARE!