Worried about the market fall? Here are ways to de-stress

So the indices fell the sharpest yesterday in recent memory. So the Sensex rose by 19% in the last year, but much of it was in the first 6 months. For in the last 6 months, the index fell by about 4%. Six months of a sideways market!

oh my! oh my! Is this it? Is the end of the 'bull run'? Is this the start of a 'bear run?'

If you had asked questions such as these in the last few days, chances are that your equity portfolio is quite young.

Welcome to the wonderful world of equity investing! That, my friend is how the cookie crumbles.

Here are some de-stressing suggestions:

1. Who cares?!

So the FIIs are pulling out. So there is no semblance of earnings growth.  Who cares? There are 100s of reasons for short-term movements. Equity investing requires faith, conviction and periodic review.

Faith and conviction that sooner or later industrial/corporate growth will have to kick in.

Periodic review is crucial but excludes following day to day market movements.

If you are worried as to why the market is falling, ask yourself how you reacted when the markets soared?

Snippets from Rudyard Kipling's  poem if sound perfect here (a bit out of context though!)

If you can keep your head when all about you   
    Are losing theirs .......
If you can trust yourself when all men doubt ......
If you can wait and not be tired by waiting .....
If you can meet with Triumph and Disaster
    And treat those two impostors just the same; 
Markets reacted to the arrival of the new government in the hope of a recovery. Now they realized that change cannot happen overnight. In the meanwhile, practical governance has its own hindrances.
Voting for change is fine, in fact, that is what we should be doing every 5 years, but we must realize that change takes time and, well, co-operation.

2. Uninstall!

Get rid of any app in your mobile that updates indices or fund nav, portfolio every day. Grow out of the eagerness to find out the days gains/losses.

3. Unsubscribe!

Unsubscribe from your demat account providers daily market view updates. Same goes for portals like moneycontrol and the like.

Lesser the information, you have access to, the calmer you can be.

In fact, I think you should unsubscribe from all personal finance blogs, (especially mine) and get out of Asan Ideas of Wealth and all other facebook groups.

4. Understand!

If you wish to spend time reading about finance or otherwise, try coursera. Try analyzing past equity returns. Try understanding risk-return metrics etc.

Understand the nature if stock market returns. Understand how much it can fluctuate.

That is knowledge, not information. It will help you calm down.

The most important peice of gyan that I have understood is that, equity returns are clumped. There would be few years of highs, followed by several years of nothing. Rinse and repeat.

Therefore, all good things come to those who wait patience is a virtue, and all that sort of thing.

The most mathematical statement on the markets that I have encountered in plain english is from R Balakrishnan (CRISIL founder, analyst, organic farmer to name just a few):

"Equity will give you returns, but not when you want it too"!

5.  "Do you think everything will be alright in the end?

That is a quote from the film Mortdecai.

The answer from the movie is perfect:

“I couldn't say sir.”

There are no guarantees with equity investing. Only people who sell or are clueless can offer you guarantees.

If want reassurances each time the market 'crashes' by 2% (which is as normal as they come), stay out of equity.

If you want to create wealth, if you want to beat inflation after taxes (even if gains from equity was taxed as 30% - a study by the late Parag Parikh), then you got to step in the roller coaster and stay put.

6. Let it be!

Do not monitor your equity portfolio if it is less than 5 years old (assuming you are investing for a long term goals several years away). Ensure you invest enough for you goals and let it be.

7. Say no to monkey business!

Forget about PE based investing, moving averages, tactical asset allocation,storing cash in liquid funds and other blah blah. Simply too stressful.

Invest what you can each month as per a fixed asset allocation and think no further. Let others break their head about investing tactics. Let them get a higher CAGR than you. Everyone is going to die anyway, so might as well adopt simple techniques and enjoy other pursuits.

Keep calm and MDBSC on!

Cracking under stress! By Bernard Goldbach (flickr)
Cracking under stress! By Bernard Goldbach (flickr)

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44 thoughts on “Worried about the market fall? Here are ways to de-stress

  1. Bala

    Superb Post Sir ! Thanks. It is not a CAGR competition. It is just that how much money you have when you need for your goals. Anyway who can say how much is enough in life ? I am just closing my eyes and ears and chanting the mantra MDBSC learnt from you and Subra sir.

    Reply
  2. Bala

    Superb Post Sir ! Thanks. It is not a CAGR competition. It is just that how much money you have when you need for your goals. Anyway who can say how much is enough in life ? I am just closing my eyes and ears and chanting the mantra MDBSC learnt from you and Subra sir.

    Reply
  3. Sandip

    At least I followed one suggestion of yours, and it worked wonder! I unsubscribed from the Facebook group Asan Ideas for Wealth - and life is so better now.

    Reply
  4. Sandip

    At least I followed one suggestion of yours, and it worked wonder! I unsubscribed from the Facebook group Asan Ideas for Wealth - and life is so better now.

    Reply
  5. capt verma

    sir,
    i have read all your postings in one week fully including the book retirement myth by jim otar.
    it is really eye opening

    i have one big fear and question for you
    what if stock market goes up and down like always but remains sideways as you say for next 15 yrs when i am about to retire.
    this is the time frame i am looking for my retirement corpus in equity.

    do you have any calculator for worst case scenario like otar says when eiffel tower facing 100 kph winds

    what should we do

    Reply
  6. capt verma

    sir,
    i have read all your postings in one week fully including the book retirement myth by jim otar.
    it is really eye opening

    i have one big fear and question for you
    what if stock market goes up and down like always but remains sideways as you say for next 15 yrs when i am about to retire.
    this is the time frame i am looking for my retirement corpus in equity.

    do you have any calculator for worst case scenario like otar says when eiffel tower facing 100 kph winds

    what should we do

    Reply
  7. Shan

    Actually, this is THE time to start yet another SIP, sell off your gold and put it in equities (maybe not all at once, but you get the idea), break the FD and start putting it into your favorite fund (or ETF) and so on.

    Basically, look at this as a big huge SALE sign in front of your favorite mall. You would want to go in and take a look, buy a thing or two, right?

    Reply
  8. Shan

    Actually, this is THE time to start yet another SIP, sell off your gold and put it in equities (maybe not all at once, but you get the idea), break the FD and start putting it into your favorite fund (or ETF) and so on.

    Basically, look at this as a big huge SALE sign in front of your favorite mall. You would want to go in and take a look, buy a thing or two, right?

    Reply
  9. Anshuk Jain

    Storing cash in liquid funds shouldn't be complex.. Or maybe I am not reading it correctly..

    Reply
  10. Anshuk Jain

    Storing cash in liquid funds shouldn't be complex.. Or maybe I am not reading it correctly..

    Reply
  11. Syamantak

    Loved the 2nd point! You must do that.
    MC has developed a bad habit of guessing reasons behind ups and downs and post it every morning. And one Mr X X tries hard to predict the market outlook every day just to contradict his previous statement 😀

    Add a content filter to the browser to restrict all fin news channel websites 🙂

    Reply
  12. Syamantak

    Loved the 2nd point! You must do that.
    MC has developed a bad habit of guessing reasons behind ups and downs and post it every morning. And one Mr X X tries hard to predict the market outlook every day just to contradict his previous statement 😀

    Add a content filter to the browser to restrict all fin news channel websites 🙂

    Reply
  13. Anand Vaidya

    If I have to pick Diamonds from this gem of an article it would be your last paragraph,

    "Invest what you can each month as per a fixed asset allocation and think no further. Let others break their head about investing tactics. Let them get a higher CAGR than you. Everyone is going to die anyway, so might as well adopt simple techniques and enjoy other pursuits."

    That one statement alone needs to be burned in investors minds. A lot of stress in investing comes from not what MY returns will be vs my expectation/requirements but what I get vs what others are getting...

    Reply
  14. Anand Vaidya

    If I have to pick Diamonds from this gem of an article it would be your last paragraph,

    "Invest what you can each month as per a fixed asset allocation and think no further. Let others break their head about investing tactics. Let them get a higher CAGR than you. Everyone is going to die anyway, so might as well adopt simple techniques and enjoy other pursuits."

    That one statement alone needs to be burned in investors minds. A lot of stress in investing comes from not what MY returns will be vs my expectation/requirements but what I get vs what others are getting...

    Reply

Do let us know what you think about the article