Their logic largely was “Tomorrow will be like today, so what if yesterday was not like day before yesterday”. I fail to understand this logic – but that is for Behavioural Finance experts to talk about.

At 21000 most RMs and IFAs had convinced their client “See the past 4 years, most of my clients have got 34% p.a. returns, so you will get at least 24% p.a.” “Sir we can SHOW only 6% and 10% projections, but our fund manager had got 48% in the past 6 months. So let us conservatively assume say 30% p.a. for the next 30 years….”

This is not a RM bashing place. Simple. Risk is largely counter-intutive. When you think there is no risk, risk is maximum and vice-versa. AT 21000 people thought there was no risk. Now at 12000 people think there is too much risk. Both are wrong. Risk is always there is the market. For a person who invested in Jan 2008 and he thought he will sell @ 25000 in June, he was being foolish. However, the person who thought that index can also go down to 9000 in 6 months time and therefore part invested (through sip) is surely looking smarter.

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