And on Friday the 13th March 2020, the Black Swan event which we keep fearing has made its entry in the form of CORONA VIRUS sending the World Markets into a tailspin with almost unprecedented fear and causing extreme panic.
The Indian Stock Markets have fallen by more than 20% and was still volatile.
I used the word ALMOST unprecedented, meaning there were precedence earlier too.
The most prominent one I recall is the 2008 Fall.
In that fall, Indices fell by more than 61% and even big institutions toppled over and I would say was much more brutally devastating.
But, those who held on to their investments had a great fruitful returns.
The quality portfolios giving bigger returns.
People remember the 61% fall, but very few remember the immediate next years returns of 157% positive !!!
In fact, History shows that each BIG FALL year is followed by a BIGGER Gain year !
Today, March 13th 2020, the Stock Markets touched lower circuit on the opening bell and was closed for 45 minutes.
Historically, whenever the markets have touched the Lower Circuits, the returns have been from 15% to 25% within a year.
So, the chances of you getting better return from hereon is much more.
CARONA SE DARO....NA !
History is replete with attacks of virus on Humans. And history also tells us that Humans tend to very quickly develop immunity against that virus.
The scientists too are working overtime to tackle the virus.
The solution seems to nearer than ever before.
I think the Coronovirus is over hyped....
I am not at all denying its threat but I am pretty sure the fear is over hyped.
Such massive falls have always been swift and sharp catching even experienced investors off guard.
At the same time, the bounce back have always been equally quick.
POSITIVES IGNORED :
There are many positives which has been brushed under the carpet.
1. The fall in Crude and other commodity prices is a huge plus for India helping us control inflation and interest rates.
2. The Forex Reserves are at all time High.
3. The Markets are now at very attractive valuations, especially compared to the last 15-24 months.
4. Nifty Earnings Yield more often than not trades at a good discount to Bond Yield.
Whenever Nifty earnings Yield has exceeded the Bond Yield (its nows exceeding by 45bps), the returns have tended to be huge.
5. Good Monsoon
6. Trailing PE of Nifty is now 23.7
and Market Capt to GDP is ony 68%
7. And one more positive thing which many have completely forgotten is the Reduction in Corporate Tax Rates.
This rate cut will improve the profit margin of Indian companies resulting in higher EPS and consequently higher stock prices.
THE HISTORY OF BIG FALLS & THE BIGGER BOUNCE BACKS :
Year 1992 - Sensex down by 54% in a year and up by 127% in next 1.5 yrs.
Year 1996 - 40% down in 4 years and 115% in next year
Year 2000 - 56% down in my 1.5 years and 138% up next 2.5 years.
Year 2008 - 61% down in 1 year and 157% up in next 1.5 years
Year 2010 - 28% down in 1 year and 96% up in next 3 years
Year 2015 - 22.3% down in 1 Year and 25% up in next 7 months
THE SENSEX FELL FROM 20873 ON 8TH JANUARY ALL THE WAY DOWN TO 8160 ON 9TH MARCH 2009
It was down by almost 61% but ROARED BY BAY 157%
The Bounce Back is always sharper and BIGGER each time!!!
yes, you read it right about 28,00,00,00,00,000 but he is not selling off any of his shares/company assets in panic and THAT'S THE REASON HE IS THE RICHEST (oh sorry, now the 2nd Richest) IN ASIA.
He is absolutely unnerved, calm and going about his business in his usual manner.
Why and how ?
Simple....he is not worried about the day to day variation/volatility but clearly focussed on the LONG TERM WEALTH CREATION.
He is a true follower of #DON'T RETIRE RICH philosophy.
Lets take a cue from him and understand that the portfolio valuation may be showing LESS today but it certainly DOES NOT MEAN WEALTH IS ERODED FOREVER.
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” – Warren Buffet
- GOLD prices fall, their first reaction is....GOOD.....Now I can buy more
- When Land Prices fall, their reaction is ….CHALEGA....I AM HOLDING FOR LONG TERM
Has my money gone??
Let me Take out whatever is left!!
but, the same investor, will not even blink when it comes to selling Equities even at a loss!!
DO NOT ALLOW YOUR NOTIONAL LOSS TO TURN INTO PERMANENT LOSS!!
If your Direction is Right.....you just need to keep on Walking.
There will be stones on the way....you will have to negotiate them and move on.
Dont turn away looking at the number of stones.
So, when the Direction is right....in this case...our Direction is Wealth Creation and our vehicle also right...that is the EQUITY MUTUAL FUNDS...then there is absolutely no need to keep looking at the NAV on a daily or even a Weekly basis.
Sometimes it makes great sense to be like an Ostrich and ignore the noise all around.
Do not ignore EQUITIES.
Equity still remains the BEST ASSET CLASS to Create True Wealth.
Yes...its full of fluctuation, volatile and tests your patience but its return generating capacity has never been doubt.
Hence, you are strongly recommended to contact a Good Proved Advisor and retire with Freedom...Financial Freedom.
Never, fall into the trap of Direct.
Dont become PAISA WISE RUPEE FOOLISH.!!!!!!
Better to pay 1% than to lose sleep over the entire 100% and even be at a situation where you lose the principal itself.
We also urge you to read
Author of the Amazon Best Seller DON'T RETIRE RICH
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