Category Archives: General

Markets on Fire Sale

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Greetings from PenguWIN

A fire sale is a sale of assets at heavily discounted prices. Here, I am referring to the sale of stocks in the market as though all businesses are closing down. Initial reports from the World Health Organization said that the death rate is between 3 to 4%, the rate being higher for 60+. Older people and those with respiratory problems, heart disease or diabetes are at greater risk. There are other sources from websites to news channels quoting death rates as low as 1%. Immunity among healthy young people seems to be high.

The impact of this Corona Virus pandemic seems to be accentuated by today’s social media like never before, with people overreacting by buying too much retail household stuff, thereby creating shortage and panic.

I am sure many of you who have invested in equity funds would be going through anxiety. However, this is a black swan event that no one can predict. We have had such events in the past including the Dotcom bubble, Ketan Parekh scam, 2008 financial crisis and every time the market has bounced back sharply and reached greater heights. These events have occurred in the past and will continue to occur in the future too. It’s just that we will not be able to predict when and the magnitude of it.

My request to you is that you stay away from monitoring the portfolio during tough times like these. The dip in your portfolios is ephemeral and will not affect your long-term goals unless you have invested money required in the near term in Equity Funds. Another blunder that people commit is to panic and sell their funds. If you have the conviction, this is the best time to be greedy and invest more (rather than sell and incur a loss). Personally, I have done this in the past and doing it now too. This does not work for all investors, especially people who have never faced a crash like this.

If you have any specific questions on your portfolio, please write to me or call me and I will be glad to assist. Both humanity and markets have withstood a lot of calamities and have seen that problems are temporary and progress is permanent

<Blog # PenguWIN 1074 – Markets on Fire Sale>

Stay the course, Equities will deliver

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Greetings from PenguWIN:

PenguWIN wishes you a wonderful Vinayagar Chaturthi !!!

Greetings

There is a sense of negativity in the market with investors doubting whether Indian Equities as an asset class has lost its mojo. Returns from lumpsum investments done 3 years ago, SIPs that are 4 to 5 years old are close to zero or even negative.

Will Indian Equities Deliver? The answer is a resounding “Yes”, Stay the course and Equities will deliver. As long as businesses thrive and make profits (Automobile sector woes are a passing phenomenon), you can be rest assured that equity investments will be able to deliver higher returns than any other asset class as picturised below.

Instead of being verbose I have attached charts based on actual data that will help increase your confidence level and conviction in equity. I have picked funds that have a minimum of 10 years history and not the best performers (to make the charts look better)

Highlights

  • 10 Jan 2008 was the all-time high reached by Sensex – 21206. Investment done at this point as Lumpsum is depicted. On 27 Oct 2008 Sensex reached a low of 7697. i.e. 64% down from high on 10 Jan 2008
  • Lumpsum investment of 1 Lakh on 4 Jul 2014 and 10,000/- SIP per month starting Jul 2014
  • Advancing the SIP start date (10K per month) from Jan 2013 instead of Jul 2014.

“When there’s nothing clever to do, it’s a mistake to try to be clever.” Howard Mark

<Blog # PenguWIN 1070 – Stay the course, Equities will deliver>

Navigating Tough Times in Stock Market

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Greetings from PenguWIN:

Most people dislike uncertainty and change. But resilience to these characteristics is what makes a successful investor in Stock Markets.

Reminiscing couple of Buffets Quotes

The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.

Successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant”

Yes, things are easier said than done. After seeing returns slowly move up and cross 10% and even close to 20% for investors in the past 5 years (depends on entry point), going down to less than 10% is difficult to digest.

So, what can we do?

  1. Don’t lose sleep by looking at returns on a continuous basis which is dependent on the market and fund manager. Even if we change the fund, there is every chance that the earlier fund manager will do a course correction as everyone makes mistakes, while the new fund might go into a bad phase.
  2. Markets are influenced by too many factors, some logical. Political changes, Foreign Portfolio Investor (FPI) flows, Finance and Commerce ministry policies, Budget and Taxation, GDP, Inflation, sectoral issues (Coal, NBFC) and the list goes on. Again, not in our control.
  3. Time in the market is what is in our control. It has been proven across all markets that consistency of returns increases by time “n”. Also, there is no other legally investable asset class that can match equity returns and it has been proven time and again. If equity returns move down to 12% then the other asset classes will be down further by 4-5%, i.e. 7 to 8% max.
  4. Look at pure equity investments only for financial goals that are 5 years plus in horizon. Once we do that checking whether it has gone down or up in year 3 or 4 does not make sense. Also, given the criticality of a goal, whether negotiable or non-negotiable, do proper planning so that a correction in the last year of the goal erodes your corpus making the goal unviable. If it’s negotiable, then you have the luxury of postponing the goal until you reach the desired corpus
  5. Conviction in equity investing. Every time when the market tanks if you start doubting whether you made a wrong choice of asset class there is no end your misery. Typically one review per year is good enough. If your proportionate allocation to equity is significant, then once in 6 months is fine.

<Blog # PenguWIN 1069 – Navigating Tough Times in Stock Market>