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(Precious) Words of Wisdom : "Risk comes from not knowing what you’re doing." ~ Warren Buffett

Equity Investors : Disappointed, Dejected, Disheartened

Last 5-6 years have been tough... very tough... for equity investors.

Though, 5-6 years is a decent enough time to see some returns, this time it hasn't been so. Moreover, with the economy collapsing, the future too doesn't look promising at all.

Therefore, it is no wonder that people have lost all hope. As such they are deserting equity and moving to other asset classes like gold.

However, instead of panicking and taking some rash steps, it is best to step back for a moment and think objectively.

Firstly, the situation is not as bad it appears to be from the headline numbers. I have done some number crunching from time to time and reported this fact in my blogs earlier viz. I am fed up with equity. It has given 'nothing' in last 5 years and Markets don't make millionaires. Only good businesses do.

As is evident from the details, the matter is definitely not serious enough as yet, to ditch equity altogether. So it would be prudent to cut out all the noise and focus on the facts. 

Secondly, it would be wrong to blame equity for the mess. You are driving safely in your lane. A car coming from the opposite side breaks the barrier and hits you. Your decision to drive in your lane was correct. It was unfortunate that someone came and banged into your car. 

Many young and dynamic engineering graduates were offered jobs at the best IT companies last year. Yet, subsequently, their joining dates were extended by almost a year. (In fact, some are still to receive the green signal to come and join). Surely, the decision to do engineering and accept the job offer from the best IT company was not wrong. It was unfortunate that downturn in US/Europe meant that they were unable to join.   

Similarly, it is not as if your 'decision' to buy equity was wrong. If you had invested in Sharda Chit Fund or bought a penny stock, that would have been 'bad decision'

Unfortunately, the economy has suffered a massive downturn from around 9%+ growth rate to just about 5%. As such, despite being one of best assets, equity has failed to live up to its expectations. So let us clearly differentiate between 'bad decision' and 'bad result'.

So, now what?

a) Since there is nothing wrong, per se, with equity as an asset class, it would be wrong to exit it totally. 
b) India normally acts correctly when there is a crisis. So hopefully, now that the economic crisis is upon us, the Govt. will junk all its thoroughly retrograde policies and take appropriate steps which will put our economy back on growth path.

So, instead, let us stay invested. Of course, we must make sure that we are invested with good managements and good businesses.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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