10 Apr 2020 by Pradeep U
An Interesting Real-Life Analogy with the Current Stock Market Situation

Real-life experiences offer the best lessons of our life.

Do you agree with me on this?

Last week, I had written to you about how my real-life train journey to work taught me about becoming a contrarian investor in the Indian stock market. I hope you found it an interesting read. You can read it here.

Today I wish to write to you about another interesting real-life analogy with what we are currently experiencing across the stock market in India.

It was almost 25 years ago that I had a difference of opinion with my best friend, Pravin in school. The argument soon turned into a heated debate, and before either of us realised, it progressed into a physical fight.

Though Pravin was bigger than me in size, I was quicker.

I punched Pravin’s face resulting in a bleeding jaw. As other students rushed to hold us back, Pravin swore at me that he would never talk to me again in his life.

But a few weeks back, things were back to normal between us as if nothing had happened at all.

Many years have passed since, and we have had many such fights again in those years, but as usual, things would be the same again between us after a few weeks.

Isn't it quite similar to what we have been experiencing in the market over the last few decades, where investors stay away from the market during a bearish phase and come back to the market after some time when the tide changes as if nothing really happened?

Stock markets in India have witnessed quite a bloodbath over the last few weeks.

Let’s take a look at some of the headlines which flashed across newspapers recently

“Bears on the Prowl as Sensex crashes 3935 points."

Stock Market looks unenthused by RBI steps, Sensex sinks 1,400 points from highs."

“Sensex crashes 674 points on rising COVID-19 worries."

Yes, these headlines look quite scary and intimidating.

But if you ask yourself, would these headlines matter after 3, 5 or 10 years?

Honestly, the answer would be NO.

Because if you look at the history of Sensex, it is quite evident that despite several corrections it has ultimately always moved in an upward trajectory from 1000 at inception in 1979 to 42000 levels in Jan 2020 before the current crisis led correction started.

So, you see stock market investing has a lot in common with our real-life experiences.

A few years from now, when you think about your stock market investment decisions during crisis times, you will be rejoicing that you took a right step towards wealth creation by remaining invested or investing more in the stock market. 

All the pain that is currently there in the market will be forgotten just like those little fights during our childhood. 

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