When you invest in shares (or equity mutual funds) and hold on for the long run, YOU WILL feel the pain on many days. What you should be asking are the following questions:

  • Will it be painful to hold on to euity in the long run (that is answered dummy, it will)
  • How much pain can I endure (meditation and pain threshold management will help)
  • At what stage of my portfolio downside will I pull my hair and sell off all the shares?
  • Do I have enough resources (earned income and passive income from non euity portfolio)
  • Will I have the cash flow, patience, and conviction to invest more or sit tight in a bear market?
  • When I hear a hear growl what should I do ?
  • Do I need to react at all to a down market?
  • How will I and my portfolio react to a 18 month slow grind from 31000 to 27000?
  • If I am the types who buys INSURANCE after I have fallen ill, shares are not a sensible place to invest

Whenever I address a group of people one of them will get up and say “whatever you say, there is risk in the markets”. Yes dummy if you think there is no risk in keeping it in cash at home, or in the savings bank account, or in debt funds, or in Real estate…you should not keep it in shares too. You should earn X and spend X.

If you are a 34 year old and you invest all your money in bonds, PPF, and Endowment plans, it means you were not taught risk properly.

None of the pundits who come on TV can stop a market from going down. Wait make it plunging down. Market corrections are not bugs in the market that some brilliant man can remove. Every big investor has seen his portfolio go down – and go up with time.

Do not start investing like a 78-year old pensioner when you are 35. Putting all of your money into bonds, debt funds, endowment plans, PPf and cash because you are upset with the recent crash (or worse your father lost money in the Mehta or Parekh scam) is not a good strategy. Resisting a bear market with “safe” investments will make your long term goals remain unfulfilled. Its a sure way of converting a pain into terminal pray.

Resist changing your long-term strategy. And for that create a strategy by applying your mind over a long period of time. Think of a T 20 game. I doubt India would think of putting Dhoni as a opener just because they need 180 runs to win. Ditto for your portfolio. A drastic change caused by frayed nerves / boredom / watching TV is a form of resistance that is guaranteed to fail.

In the words of the Buddha, “When the uninstructed experiences a painful feeling, he feels two things – a bodily one and a mental one…When the instructed noble disciple experiences a painful feeling, he feels one thing; a bodily one, and not a mental one.”

Fluctuation in your portfolio is guaranteed. Your reaction determines the result.

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