13/02/2018
Pain is inevitable
We’ve always told you that 10% corrections once a year, 20% fall once in few years and 30% fall once in a decade is very common. There is no way to avoid the same. The 15% expected returns from equity over a decade includes the periods of high returns, low returns, no returns and negative returns.
Globally markets have been falling for last one week. Looks like India would not be immune to this in the short term. In the short run, markets are affected by so many factors. In the long run, it is the earnings and earnings alone which matters.
All our regular sharing and mentoring is to help you face periods of negative returns. Pain is inevitable in the roller coaster ride of stock markets. If we can understand that this pain is part and parcel of journey towards superior returns, we would suffer less.
Nobody would happy to see their portfolio going down by 20%. At the same time need to remember that these are notional losses. We should not make it a permanent loss by selling in panic.
Though I’ve no ability to predict markets, looks like near term may be bad. It would be better if you can avoid looking at your portfolio during such turbulent times. Corporate earnings have started picking up well from last quarter, and the businesses are expected to do well in future. If businesses do well, earnings go up and the same gets reflected in stock prices.
When the market falls, the business does not fall. Colgate would not sell lesser toothpastes due to fall in stock prices. Focusing on business instead of stock price is always a good thing, more so in bear markets.
It is in these times, we need to keep in mind the bigger picture. Good Indian companies have long run way of growth ahead of them which would create tremendous wealth for shareholders. To earn this wealth, we need to go through periods of pain, such as what is happening now.
No pain no gain is definitely true for wealth creation through equities.
Brace yourself to face short term pain for long term gains.
As forwarded.
