1. Suddenly many jobs are being lost: Remember slowing down, closing down are not words that happen only to somebody else! It happens to the best. Only your salary is certain, the variable salary is really variable. I now know of several people who are EARNING about 60% of their claimed CTC. The variable is just not happening.

Learning: when you commit to a life style, emi, etc. IGNORE a big portion of your salary. Assume only 50%, it helps.

2. Sorry kids, I got it wrong: Many kids in the age group under 26-7 who have done their SIP in equity funds may have to hear taunts from their parents! All SIPs started in the past 1-2 years are under water. If their parents are saying ‘see I told you, keep your money in the bank’ – frankly I do not know what to say. Equities will do what it does. Keep your cool. You have to do what you have to do!!

Remember the returns from 1979 to 2011 was about 18% p.a. – if you add dividends reinvested the returns should be better. However no ONE year may have got you 18% – there have been years of -46% as well as super years like 242%. Be ready for volatility. A terrible 2008 (-40%) was followed by a fantastic 2009 (90%)….so BELIEVE in equity. Accept that volatile assets will not give you linear returns. Have patience it is a test match, not a T 20 match.

3. Debt market is attractive ONLY in the short run: If you think SBI bonds at 9.95% p.a. is attractive, remember money should grow in REAL terms, not just NOMINAL terms. Nominal returns in SBI is 9.95%, but inflation is say 11.95% – in such a case YOUR money is not growing in real terms. It is SHRINKING….so you need to be in equities. Being in debt funds (I am in debt funds too) is a good tactical move for 12-14 months, at the end of that period you will have to come back to EQUITIES.


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  1. Wonderful article. For those who want to see empirical data(for 200 years in US markets), here is a good article(http://www.indexuniverse.com/publications/journalofindexes/joi-articles/5710-bonds-why-bother.html). The synopsis is that for 200 years stocks comfortably beat bonds but if you take several smaller durations(though as long as 68 years in one case), bonds have done as well as stocks. So diversification does matter, especially when markets are exuberant(think late 2007). One can see the “Permanent Portfolio” concept of Harry Browne for a good analysis of long term business cycles and impact it can have on personal finance.

  2. Choon – ‘sorry’ because I cannot stop their parents from taunting them..and as of now, their decision to invest in equities seems to be wrong. Also the media puts up stupid headlines like ‘The Govt of India has lost Rs. 500,000 crores in market cap’…So parents can taunt more…:-)

    Agreed Nir…what people do not understand is the DEPRECIATION in a debt portfolio when interest rates go up – and that can hurt. Debt instruments give better returns than debt funds. However at the upper end of the interest rate cycle debt funds are good, but obviously you need to have a 3-4 year view AND HAVE TO BE ALERT to a flat int rate scenario or a rising int rate scenario. Whether it is Jeremy Siegel or Subra there is an OPTIMISM and THEREFORE EQUITY bias..so please read my views on equities with a pinch of salt. Having said that I am about 75%+ in equities ALWAYS…:-)

  3. In point # 1, it is highlighted that job market is tight, lucrative offers are no more existent and on the top of all, variable pay is to be considered as volatile.

    Now with EMIs of home loan (floating) and Car loan coupled with EPF/PPF, do normal employees of even IT/Banking/Services are left with surplus money to think about investments.

    The high inflation (food, fuel), rising maintenance costs in the apartments, interest rates hikes in home loan EMIs, Steep jump in School fees compounded by variable pay cut is too difficult to grasp with. Further erosion in equity capital (little by little accumulated over years) is like death blow and telling them to be patient to see heaven in 10 years needs lot of courage.

    Don’t suggest a surgery for first aid treatment. A lot of people could survive with timely and simple first aid treatment done on spot. Investing in debt is like first aid treatment. Don’t undermine it.

  4. great post:

    The single most important lesson is that after day there is always a night.

    We read that it will come. But mistook the twilight for the night.

    The day will come back. But I hope that I will not mistake the dawn for the daylight

  5. What was the SIP return on Sensex from 1993 to 2002? One time investment was negative.

    Diversification is the way to go especially if you are not an expert in a particular asset class.
    Bias towards equity is as bad as bias towards debt, real-estate or gold unless you are an expert in it.

  6. These are short term blips and long term investors should not focus on them. It is advisable to keep investing in pessimistic times.
    It is during such negative times that great portfolios are built.
    You can easily buy good quality stocks at really cheap prices.
    So believe in researches that say that stocks outperform all asset classes except human brains 🙂 and keep on investing regularly. And you do not need to time the markets as over extended duration, the difference between a perfect and imperfect timer of markets is minuscule at 6%

  7. well, I’d like to leave only a grin, but the blog wouldn’t allow it.

    if you can’t stand the heat, go!

    (in equities since early SIXTIES– the parent’s portfolio)

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