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Confused or Convinced – What to do with your Investments?

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 "The doorstep to the temple of wisdom is a knowledge of our own ignorance" – Benjamin Franklin

Trust you had a very good festival season and did some cleaning and new decoration on Diwali. Today we are living in very highly dynamic age. Situations as well as sentiments change very fast. We start on a highly positive note and suddenly one news arouses grand fear in us or vice versa.

While we have no doubt about Indian economy’s strengths knowing it is the fastest growing major economy in the world and is poised to achieve much greater heights and become the third largest economy of the world in less than five years. But off and on some news or events affect our emotions and thus the investment decisions.

About three years back economy seemed started to be picking up after demonetization and initial glitches of GST implementation when government announced mega infra spending plan in its budget for 2020. Suddenly covid invaded us and it looked like there will be no tomorrow. The whole mankind will succumb to this demon. It didn’t take much time to overthrow this fear and we were back on track in just 7-8 months.

Russia attacked Ukraine and there were immediate fears of energy crisis engulfing the whole world. Winters were closing in and Europe was shivering even before the onset of winter because they were hugely dependent on Russia for its energy needs and on Ukraine for its food grains requirements. Its over one and half year now that war is still on and all such fears have subsided or flew in the air.

This year in March, all of a sudden we heard news of three banks (Silicon Valley, Silvergate & Signature Bank) collapsing in USA. And it seemed like world is headed for another Great Financial Crisis like that of 2008 and world economy will be in deep crisis. Also about a couple of weeks back when US G-sec yields rose to 5%, host (or ghost) of Gurus started predicting US economy going into recession.

Very recently when Israel started retaliating to Hamas’s brutal attack on its citizens, talks erupted of third world war. And rightly so because many Muslim countries raised concerns and started threatening of dire consequences. USA also intervened in support of Israel. But slowly now everyone seems to have toned down their aggression knowing the realities the destruction, a war brings.

There is a popular adage in investment fraternity “Human or Equity – both are bound go up over a period of time.” Below is a chart prepared by Bajaj Finserve AMC team on the emotional situations of investor through various financial and non-financial events.

 

 

We must understand we are living in altogether a different world than it used to be about 10-15 years back. At one end the present generation seems to be going for instant for everything and believe more in change than repair or improve. On the other end as far as investing is concerned they are now betting for long term and investing systematically. By October end SIPs in India almost touched 17,000 crores. Apart from this a good amount is being invested through insurance policies, NPS, provident funds etc. In all about 22,000 – 25,000 crores of rupees are flowing into stock markets, every month.

As investor you are well aware of basic principal of economics of demand and supply. When large money is chasing stock markets it has to go up. During the period various episodes of short term shocks will keep emerging as shown in above graph but in the long run, if we talk about its performance say for 7years, 10 years or higher it will be much higher despite some short term shock at that time.

And don’t forget, its only about 6% of household savings that have been channelized into stock markets which was just around 2% 10-12 years back. But just think with the speed it is increasing, it will double over next 7-10 years. And by 2050 it should cross 30% of overall household saving. Imagine the market values at that time.

With Indian economy booming, diplomatically well placed on the global stage, domestic consumption story playing very high, demographic advantage, make in India and so on. There are so many positive stuff that keep its overall long term growth story intact. Even if there is geo-political disturbances and world goes into war, India will not get much affected but will come out much stronger force to reckon with than now as did USA & Russia after the first and second world wars.

So go ahead invest in Indian equity directly or through mutual funds to participate in India’s growth story and make good returns on your investments. But don’t forget to maintain your asset allocation to align your investments vis-à-vis your goals and to absorb short term shocks as and when they come because they always come unannounced. And if you feel it difficult to manage the asset allocation then use balance advantage funds or multi asset funds for the same.

Call your InvestmentMitra to review your portfolio and take necessary action, if any. You may also drop an email to ajay@investmentmitra.com for your queries or whatsapp on 9958447700.

Thank you.


Happy Investing!                                                                                                                               

Team InvestmentMitra

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