Markets
are on a see-saw. For a few days they surge and then they slip back. I guess
this is going to be the story through 2019. Let’s look ahead.
·
Election results –
Look, there is always a knee-jerk reaction to election results. Always remember
that you invest in equity because you want to make money in the long term and
not for short term profits. In the long run, it really does not matter. The
market’s reaction to 2019’s election result will be a tiny blip 10-15-20 years
from now. Let’s look at some facts about where the markets were in:
|
Year
|
Sensex
|
|
|
1980
|
148
|
|
|
1990
|
1048
|
|
|
1992 Aug
|
2529
|
Harshad Mehta crash
|
|
2000
|
3972
|
|
|
2008-Oct
|
8509
|
US Housing bubble crash
|
|
2010
|
20509
|
|
|
2019 (15-Feb)
|
35809
|
|
If
out of fear and a feeling of despair you had not invested or disinvested in 1992
or 1996 or 2000 or even as recent as 2008, you would have lost out. Markets go
through their cycles and have their ups and downs. As an investor, you have to
learn to ‘ride’ these patterns. Investing is not only a ‘Gloom and Doom’ Report,
there is also a ‘Bloom’.
Think
of the year 2025, 2030, 2040 and beyond. Will this election result matter or
will growth matter? No matter who has been in power, economies have only
progressed. From the Great Depression of 1929 to electric cars, from the Bengal
Famine of 1943 to having a surplus of foodgrains, our lives have only improved,
and markets have always reflected this.
So, don’t fret over who will win and which Govt. will come
to power, focus on charting out your LifeGoals and investing wisely to achieve
them.
·
Recession in the US and Europe? – According to Krugman, the US is in worse shape than it was
in 2008. What he is referring to is the country’s huge public debt which, at a
little over $22 trillion, has been growing over the last few years, and a
debt-to-GDP-ratio – a measure of the ability of a country to repay debt –
rising to 104% now. He is now looking at a recession also because of the
slowdown in Europe, where economic powerhouse Germany has been hit because of
tariff wars involving the US and China, a recession in Italy, and slowdown growth
in France. 1
· Debt markets on tenterhooks
– The IL&FS story broke in late-2018 and debt markets have been in a roil
since. Just about when it was sinking in, in came the story about DHFL
promoters siphoning off money. Then, two more shots – Zee and Reliance (Anil
Ambani group) were in the news for all the wrong reasons and their share prices
plummeted. A few clients called and enquired about the way ahead – should we
sell our MFs / should we move from debt MFs to FDs? For once, even I was taken
aback with the speed of events and it got me thinking.
Why
do we invest? To make our money grow so that we can meet our LifeGoals, right?
And to achieve this, we invest across various asset classes – primarily equity
and debt and for some it could even have been in Gold and real estate. Each of
these, carry a degree of risk and all these asset classes exist in a volatile
market-space. The degree of volatility is dependant on a number of factors –
internal and external – most of which we (as investors) have no control over.
All that we can do is to try and minimize the risk so that we can meet our
LifeGoals as and when they become due. The level of volatility is not within
our control. It is very difficult, is not impossible, to predict black swan
events. So, my suggestion to you is that you have to ‘Keep Calm and Carry On’.
Do not let the near-term ‘noise’ distract you. Focus on achieving the numbers
that you have set out to get, as listed out in your LifeGoals. If you are
investing without setting out your LifeGoals, correct that anomaly.
Once you get your Focus
right, the ‘Noise’ will disappear.Have a good day.
