Things are looking gloomy out there. Not just stock market this time the fear is bigger –it is fear for life. That is a concern. Lost money can come back but lost time and life cannot. Each one of us should take responsibility. This is when Vasudhaiva Kutumbakam “The world is one family” comes alive. While battling for life and living how does any other difference matter? I truly wish people get back to health, rest can be definitely handled. Its worth introspecting how a tiny invisible virus called corona has put the most intelligent of species to halt. One big take away is we have to slow down, align more with nature. Speed thrills but it kills too. Hope we and following generations will not pay heed to speed, greed and bleed. Instead we should align with nature and succeed. Without being in the rat race or running like headless chickens our ancestors were great astrologers, mathematician who calculated things beyond compare.
The virus had to attack stock market too. After all that’s where most of the human psychology works. I really cannot comment on the reason for markets across the globe falling like there is no tomorrow. There are multiple reasons why stocks jumped off the cliff. Not that it was unexpected but the intensity and impact is huge. Ultimately most impact is borne by common man.
Suddenly I get to hear a lot of expert advice on stocks. Some are as follows:
Let your investments be untouched. It is for long term (can you define long term please?)
Sell everything and sit on cash (well then what about long term investments?)
Go for value buy. This is THE time. (These guys said value pick was Yes bank!). My heartfelt apologies for all the value investors who put hours/years to find a moat.
On 17th March, when nifty made a low of 8,916 the power of positive thinking got the bulls raging in “fear” and yelling “there is the bottom, get your SIP started”. Only to find nifty deliver another low of 8,263 on 19th March.
From 2003 to 2010 from the high of 6357 (Jan, 2008) the retracement was close to 78% in just 9 months until October 2008. It took us 64 months to make a new high.
Currently, the high of 12,431 from Jan, 2020 has been retraced 38%. I am no expert. I don’t claim to have found a top or bottom. I aim to make a decision which keeps me within my comfort zone (financially). My INVESTMENT decisions are not for few days. Not all is invested in Equity. Portfolio diversification is as important as the idea of wealth itself. Not a single investment avenue is 100% safe. Equity, Fixed Income, Gold, Commodity, Real Estate each has its own advantages and disadvantages. Proportionate distribution of investment is something one should think of. Having said that, there is no ONE PLAN FITS ALL rule. It really depends on your financial circumstance, age, risk appetite and a lot on MIND.
Problem occurs when investors turn trader and vice versa. These are absolutely different characters. While investing we definitely know there is risk associated in stocks. We accept the risk and go ahead. If we bought a stock at say Rs. 1000 and today it is available at say Rs. 600 would I still buy? If the answer is yes then it’s a buy. It could be fundamental or technical approach but the decision is what matters. One BIG fact is, if the management team in the company is not strong then it is not worth investing. There is no shortcut. Those few stocks you select for long term are the ones who make wealth. Otherwise people could buy all 50 stocks in Nifty and become rich. Isn’t it?
When people who put money in FD do not go and check every day about the status why do we do it in Investments? I mean so called “LONG TERM” investments . The money that goes to long term investments should be the portion we do not need immediately. Investment is not for monthly return but what it can deliver in 15 – 20 years supersedes all other avenues. Check it out for yourself.
Traders. There is a lot of difference between institutional traders and retail traders. There is no deep pocket to keep making mistakes. The capital is limited and scarce. Also, it does not take time to blow the account if one is trading without knowledge. It is like a double edged sword when one starts feeling “I know it all because I have professional qualification”. Frankly, qualification or certificates or even smartness has nothing to do with earning money as a trader. If one is disciplined and has a plan backed with knowledge he/she can achieve success. This is why successful traders don’t claim to know it all. They are calculated risk takers. Formula for being a successful trader is to have more number of profitable trades and less number of small losses. Loss is inevitable. Money making is a probability game. There is no guaranteed return just because we studied a particular stock day and night. The probability of success depends on how much we have back tested our winning strategies and how well we book losses in a disciplined manner.
One can treat trading as additional source of income. If the expectation is to make 10% income from trading and regularly put that earning into long term equity portfolio then there is a sure wealth creation in process. Having achievable expectation is the key. Those who trade for additional income and dream of being millionaires are going to be stressed looking at price move very frequently. No Mentor or Monk can make you rich with his experience. You need to have your own decision making and face the consequences. So, it makes sense to invest in learning how the markets work and how exactly others have built wealth over a period of time. Just following the news or some trainer or a mentor will not work, it could only add to your knowledge.
What really makes money is having a right plan, testing if that works, having a backup plan, some experiment before taking it to next level. In this whole process there are going to be losses, mistakes and pain. It is worth all the effort. Whoever says there is a quick way to make wealth has not been there for sure. You may not have to slog, slog, slog to make wealth but you definitely have to invest time before investing hard earned money. Play safe don’t play like a casino, you are only cheating yourself by faking your strategies. There are no shortcuts for success in any field. Idea is to enjoy to the fullest throughout the journey.
For now, wait patiently till the fall is over. Test the waters and then take it forward. As an investor you have lot of time to make decisions. As a trader follow your stop loss principle and keep moving with the trend not against it. Be available for your families and friends. Happy mind makes good decisions. Let us help enough others to sail through this tough time. Together WE CAN.