Today, we travel six years from a Monday on which ‘Wall Street Plunged into chaos’ to a Monday where ‘World waits for white smoke from US Federal Reserve’.Yes! It was the September 15, 2008- Too big to fall, did fall! And today, too big the economies, struggle to recover!
Needless to say, the journey of these 6 years have not been easy, the year of 2009 witnessed European sovereign debt crisis- PIGGS emerged; in the Year of Snake, 2013, emerging markets went into currency crisis-Fragile Five surfaced. (Source: Economic Times, 2013)
As we stand today, US economic growth still remains below its 2005-07 levels, Euro-zone continues to battle to attain its pre-crisis economic output levels, Japan remains at risk of recession, China’s economic growth remain flat and India still struggles to reach its GDP at 2005-07 levels. On a whole, world economy has failed to recover and continue to witness stagnation with a growing threat of another financial crisis. (Source: Global Research.ca, 2014)
During all these years, market fell to as low as 8000pts from the highs of 21000pts; hovered around 15000-16000 levels, there were states of hopes, despair and fear; but as we stand today, market is varying around 26000-27000pts. Were we ready to wait for it or did our fears hit us harder? There was nothing wrong with been cautious. But, lot of us did lost hope; thinking that something is better than nothing we accepted and lived with those deep losses in our pockets. But, no one thought market would touch 27000pts, even when advisors demanded faith, hope and patience.
Today, even though economies struggle to recover, stock market has touched all-time highs during the years. With all the ups and downs, today, September 15, 2014 S&P BSE Sensex stand at 26,816.56pts from 13,531.27pts as on September 15, 2008 earning an annualized return of 12.07%. Sensex garnered an annualized return of 24.04% from its lowest in March 2009; on the other hand, 10-yearG-sec has yielded 0.61% since the date of crisis. (Source: BSE, NSE, Bloomberg 2014)
The question is on which side of the curve you were in? Did you beat inflation or got beaten by it? The answer lies in our behavior to ‘sell in fear and buy in greed’. Yes! We are fearful and greedy beings; we fear losses, yet remain greedy for profits, but as they say ‘there’s no free lunch.’ Returns demand risk, what makes the difference, is for how long?
Anyone who would have invested Rs.100 in S&P BSE Sensex 30 on January 8, 2008, and pulled out on September 15, 2008 would have got back ~Rs.65; similarly, withdrawn on March 9, 2009, actual money would have be just ~Rs.40. However, if kept it invested for 6 years, it would have been ~Rs.129. Total wealth would have grown by 29% rather than depleting by 35% and 60% respectively on absolute basis (Source: BSE, 2014).
We as investors, tend follow market movements rather than following market discipline. As statistics state, aggressive market sell-off was witnessed during Sept-Oct 2008 at 8000-13000 levels, whereas, aggressive market purchases were witnessed during Jan 2013/May 2013 and Apr-May 2014 at 19000-23000 levels; clearly indicating that we prefer to buy at higher index levels than lower levels. (Source: Moneycontrol.com, 2014). Did you invest after a rally or disinvest after a correction? Did you fall in herding trap? Did you believe, ‘This time it’s different?’ (Source: BSE, 2014)
I would just like to know one thing- Why was it difficult to believe that market would 26000-27000 levels, even when it reached 21000pts in January 2008, was it difficult to image after the market dropped around 8000pts in March 2009. Did you fall in the game of anchoring and adjustment? Yes, you did maybe that’s you never bought the story that market can reach 27000-levels! If you did, you could have invested today, because 6 years is not too long in equities. Today, are you invested for when market attains 100000-mark or is it that fear of losing money or else greed of making more still ruling your investment decisions?
I would just emphasize on the fact that, ‘we need not worry about volatility; but be cautious of the losses.’
No comments:
Post a Comment