A bull market (I am not saying we are not in one!!) creates a happy mind set and a bear market (Ok, Ok, I am not saying we are in one) – whether for a short term or a longer term makes people anxious. Are you financially anxious? How does one deal with financial anxiety?
Well there are many things to do. Your life is a sum total of your family, friends, colleagues, likes, your readings, your job…and of course your money. The bear market only dents a small portion of the total – it affects your money. In fact if you have a simple portfolio of 25% in equities, a 20% fall in the market reduces your networth by about 5%. That is not too much is it? Also if you believe that this is a temporary setback, you can be sure that all these monies will come back!
Similarly on the way up..yes the market is up, but if you have a piddly amount in equities, the impact on your total wealth is almost insignificant. So keep looking at how your portfolios are doing.
Look at your total worth – which is what you feel you are worth as a human being + your net worth in money terms.
If your financial planner asks you to re-visit your “risk-profile” questionnaire, ask him to go for a walk. I am yet to meet a client who knows how to fill up a “risk-profile” questionnaire – or a planner who understands how to interpret it. Especially when the market goes from Bear to Bull or vice-versa. (OK, OK, I am not saying we are in a bull market – why am I denying it so hard? Because I know it is perhaps at the cusp of a longer bull run….and far, far more importantly I am not sure).
Keep looking at the TOTAL portfolio – your employment (if it is secured it is like a bond) if your income fluctuates, it is like equity. See your asset allocation, portfolio performance, etc. REMEMBER for fund management you need some maverick with an IQ of 225 but for portfolio management you need somebody with an IQ of 100 and the persistence of Rahul Dravid.
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