Making Money, Staying Calm and Carrying On

Few days back I attended a wealth management session on “Making Money”. Though the idea was quite lucrative and the attendance was good, it just turned out to be just another dead rubber for many since by the mid-session many left and realized it was just another marketing gimmick endorsing a financial product. The obvious reason why most of them were disappointed – they were looking for a ready-made solution or a product that could offer them RETURNS. If this task of making huge/decent returns on ones investment was so easy everyone would have been a millionaire by now, right?

Let’s talk further - so what happened when the recent annual budget introduced taxes on long term capital gains on Equity investment - the retail investor pushed the panic button for sell. Was it really required at that time? The obvious answer is No. But since the basic fundamentals of investment is not known to most of us - we never realize the power of “STAYING CALM and CARRYING ON” .

This ad was as an instant hit (Keep Calm and Carry On – I have just simply changed few words here to make more sense) among most of the office goers in the Delhi NCR region few years back. They could relate to it quite well when they were stuck in traffic jams for long hours and they would often get into heated arguments with fellow passengers to reach office in time. Was avoiding the traffic jams under their control? No.

Why can’t we simply apply the same methodology to our investments? Why can’t we as investors understand the way the market cycle functions? Why can’t this mad rush for achieving greater returns be toned down? And we start looking for ways by STAYING CALM. It is possible quite possible provided you have a vision in sight and believe on setting your goals (with a definite number in mind) and then aligning your investments with a definite time frame.

That’s the way your investment needs to be. You need to stay calm and carry on with your investments. Since, the 2008 financial crisis when the prospect of the equity markets looked bleak. The common investor either stopped investing or pushed the sell button. Looking back over the last decade or so that would be the worst thing to do to stop your investments/SIPs in such times.

Remember in the end you have a goal in life for which you are working relentlessly. No matter what these market cycles will keep happening and you just cannot escape it just like your traffic jam situation.

The simple fact is that there no better time to create the foundations of a solid portfolio than when everyone is running and looking to sell. Eventually over a long term horizon it’s that kind of dips that will actually produce profits for you. Remember the onion price theory I talked about in my previous write up. Keep buying low and when the market tide changes directions you are there to reap rich dividends of staying invested.

Persisting through such times is what sets the tone for much higher returns over a complete market cycle. If you end up trying to time the market you will go nowhere. So it does pay to STAY CALM and STILL STAYING INVESTED when you have a goal in sight. Till then happy investing.