If you take the returns in the equity markets from March, 2004, (financial year) the returns have been 83, 16, 73. 17, 18, -38, 80, 10, -10, 7, 18, 24, -11, 20 and if the index closes at 33000 this year will also be 11%.
Is this good news? I am not sure. If you did a SIP from 2004 and were not perturbed by the 38% fall and the 11% fall, you would have made a lot of money in this phase too.
This has done one bad thing though. It has made IFA and their clients numb. They have started thinking of the market as a good quality PPF account – it will always give you positive returns and is just like PPF -with a higher return.
This is like going to Tadoba 3 times a year seeing Muktasur every visit and thinking that a) you know the tiger very well b) the tiger has never done anything to a vehicle – even if it carried noisy, loudly dressed idiotic city dwellers c) it keeps its calm.
THEREFORE IT IS A SAFE ANIMAL.
Correct data, but you forgot that it is BASICALLY A WILD ANIMAL, and to remind you – a few days ago it had killed an attendent – maybe the attendent was at fault?
Exactly the same situation in equity markets. It has been behaving very tame. One year of -11% was not enough to scare people. However at the end of the -38% financial porn peddlers wrote articles like “last 10 year equity sip has given you returns worse than PPF”. This should unnerve people, right? Sadly media porn peddlers will continue to write such stories.
But here’s the worry! You need the bad days (weeks, months, years) to remind you that there are going to be more good times. There is this theory about life, health, sport, economics and finance – everything mostly trends. Most of our days are dull and boring. We get up and do the same stuff daily. So the growth trends a little higher. But we do get complacent during the course of all this trending. You take things for granted or you do not appreciate that most of the days aren’t bad days! Most days our car/taxi/train does not break down. Most days there is a small amount of traffic. And then something happens and everything is let loose. India lose a match to Bangladesh. A good friend shifts out of your neighborhood. You lose a loved one. You bang your car.
All that trending suddenly looks like a crash. Equity markets work like that. All over the world.
You need the bad times to remind you about the good days. More importantly, we need the bad days to remind us what’s important, what is urgent, what is trending, and that all the trending was good after all? So God let’s have some bad days. Maybe months. Maybe one year.
May they be short lived reminders that there are more good days ahead. Ab achhe din aanewaalein hain…..
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