During Market Correction, many questions are in mind related to advisor, extent of correction, current SIPs & future recovery. Honest answers ahead:
Questions & Answers – during Market Correction
Question: I am panicking. What to do now?
Answer: When we were investing, why did we invest? We invested for some long term reasons like the daughter’s marriage or your retirement. The goal is 12-20 years ahead so why a market correction is creating a panic now?
The market’s ups & downs are natural. They have happened in the past and will continue to happen in future. This is nature of equity markets.
Panic happens when we look at investment in today’s perspective. A loss today, a value erosion today.
Then we aggravate panic by extrapolating the negative thoughts. We think, if it is 10% percent down today- tomorrow it will be zero!
Markets have never been in a linear bull phase or bear phase in long duration.
Some or other things – positive & negative keep happening. Trade war, oil prices, and assassinations of political figures, natural calamities & unknowns like virus spread.
Question: What to do NOW?
Answer: Now also you have to do the same – stick to basics.
Hold. Keep on investing systematically. If possible increase allocation. It also perfectly OK if you do not want to or can invest now. No problem at all.
Question: How much more it will fall?
Answer: Only God knows this. But God is above this “Moh Maya”. He does not care and nor does he advise on these matters. No book, blog, person & soul has the correct answer to this.
“Predicting rain doesn’t count, building the ark does.”
I also do not about it. My experience says, bottoming out is feeling and not a number. Market will never signal when it is at the lowest. Only luck can land you at the bottom.
No one has been able to time market ups, downs, entry price or exit price.
Question: Honestly tell me- Should I withdraw?
Answer: Honestly if you withdraw now, you will create 2 more blunders:
- You will convert Temporary loss to Permanent Losses.
- If the recovery is also like it went down, your portfolio will lack ability to recover losses.
Question: Why you did not tell me to exit when it was an all-time high and tell me to invest when the market touches bottom?
Answer: I feel like laughing. Pardon me but don’t you think if investments was so easy, everybody would have made money. No one would lose. Is it practical? And, if I had or any advisor had that ability, why wouldn’t everybody hire him ONLY? Why do we have so many fund managers, advisors & analysts? Please understand advisors choose assets for you – for long term investing.
You have to stick around for that long term. They will do course corrections, but you have to stay put.
You are the ship, they (Fund Managers) or we (Advisors) are Captains & Navigators. Storms & tides are bound to come.
Questions: Market is falling 2000 points sometime it is under circuit… Will it reduce to ZERO?
Answer: What a pathetic use of maths…?
Tell me gold dropped 1244 Rs yesterday and around 1360 today. So do you worry it will become ZERO by falling 1200-1300 Rs daily?
Land/property prices have also come down similarly.
I still remember gold went to Rs 24000 in 2014 from 29000. There were lines in the jewelry shops.
Because we associate “Longevity” to gold. Gold is perceived as a long term asset. We do not trade it on a daily or yearly basis.
We think stocks or MFs are for short term only, hence this shortens the association.
Look how media reports & you read correction in prices Gold & Sensex.
Gold: Media Headline: Gold prices drop by 10%! Time to buy.
You: Wow SALE… let me buy. (you forget you lost 10% on existing gold)
Sensex: Media Headline: Sensex Crashes by 15%! Bloodbath in Dalal Street!
You: OMG I lost 15% on my portfolio! Curse. I will sell everything and invest in LIC.
I will you another example. A personal one.
Your child in school may get 50% sometimes or 80% sometimes or maybe lower grades. Do you disown them?
Or you look towards the future. Does his 52% in maths matter 20 years down in future when he is settled?
- Events disrupt.
- They create a crisis, impact individuals negatively,
- Small businesses can even get wiped out
- Individuals lose out their livelihood
- Govt.’s have to react and create easier monetary and fiscal policies to support.
- However the “ONE THING” it doesn’t do is “END THE WORLD”.
Fall & Rise or market correction is a process. Too much attention to the process will cut the sight of long term goals.
Question: You (advisor) is supposed to be an expert in markets. Covid 19 was known in Jan 2020. Why did you not tell me to exit?
Answer: It bothers me when you think I am a magician & forecaster despite my any such qualifications… I will again give you an example.
We (you & me) have bought land to make it a mango orchard. We have tiled the land sown the saplings.
Now every 2 months the weather app says there will be a storm & heavy rains. Should I uproot the sapling, put it into refrigerator and sow them again when rains pass? And, many times apps fail too. Sometimes rains come with no signs of arrival!
Rather, during the storm and before its arrival, I would spend time in strengthening the root-soil and employ measures to minimize the damage.
A strong tree emerges when it faces severity. Problems are nature’s way to make you strong. Learn to endure the pain. Pain makes you strong.
Once we have a strong tree then our work is done. It will face any rains, storm, extreme heat or winters.
Or are you happy with a bonsai version of the mango tree?
I think I have answered your question regarding market correction.
Questions: Can I stop the SIP during market correction? When the market is good I will again start.
Answer: “Nobody needs to walk out or stop his SIPs, because we have enough evidence that when the market is down beyond a point, maybe some stocks do not come back, maybe some fund managers do not come back, but the market will always come back and we have evidence of this from over last 100 years in some 14-16 countries.” – Samir Arora (founder & fund manager of Helios Capital)
Basic of SIP are –
- It is a periodical tool to save money. If you stop you are not saving. Simple.
- SIP works best when it SIP passes through a time when market is cheap or down.
When there is a discount on your favorite shirt you bought at full price, will you cry – I am cheated!
Or will you will buy an extra because you know you will need it after a month.
Same is the case in SIP. You invested in a WORTHY asset and now it is a little cheap then your previous purchase. But you are resenting to buy it now. You know you need them. But you are crying – why did you give me costly before?
“In 60 days from now if we are alive, then we will regret the opportunity of March 2020. If we aren’t alive, there will be nothing to regret,” said the co-founder and partner of Basant Maheshwari Wealth Advisers.
Important thing is the PURPOSE BEHIND THAT SIP. GOAL BEHIND THAT INVESTMENT.
If you have 10 years or more, the market downturn is a boon to you! You will understand only when your goal arrives.
Question: I am going to withdraw everything. I will invest in FD. I cannot bear market correction or volatility.
Answer: When you invested it was for the long term. The risk was clearly told and agreed upon. But you listened to returns it was delivering.
Since equity was giving returns last 3-4 years, you thought it is the best. Now you have panic attacks.
You know how much is FD now? Less than 6%. After-tax (30%) it is around 4% in hand.
At a 4% return, your money will double in approx. 18 years (rule of 72)!
Will you achieve a decent retirement? Can you build your dream house with these returns?
And, if you are ready to commit 18 years to FD, what is your issue with equity markets. No one has made negative returns in such a period of investment.
Question: What do I do… TV, Newspaper, WhatsApp, Telegram, Blogs all talk of doomsday. How do I save myself?
Answer: Will you read a newspaper or a blog or WhatsApp message if it only says “all is well”?
NO, its human nature to read/ see/ feel excitement. Media just takes advantage of this human vice.
They are business. Business to spread anxiety (negative & positive). So that you read it every day. You miss newspaper when it is a national holiday. Because you want anxiety and media have made you addicted.
Investment is boring. No excitement & anxiety here. Doing a task – again & again. Repeating it for years create wealth.
It is boring like watching kids grow. You don’t see much difference in your kid in 5 years. But suddenly someone who has not seen him these years, will come and say – look how grown up you have become!
We are looking at our investments daily. How do you expect you will notice the growth?
This is the worst time to check your portfolio. Even when times are good we advise to never check it daily.
Media is a medium to connect & inform. Media will show the present only.
When market is good it will only tell BUY BUY… when it is down it will shout SELL SELL…
Do not allow a free WhatsApp or an Rs 5 newspaper spoil you 20 years of investment journey.
