Before I start, let me tell you the most challenging part of working in an organization that helps investors build wealth in the stock markets. Because the performance of investments are closely interlinked with how the market functions, it becomes very challenging to convince investors when markets are going through turbulent times. Yes, precisely the time we’re witnessing now.
But let me show you a chart here:
What do you see here? Nifty delivered an absolute return of approx. 643% and a CAGR of approx. 11% over the last 20 years.
Now let me show you a table:
Now what do you see here? Nifty delivered a CAGR of more than 11% in spite of the above events that caused a temporary hiccup in the growth of the Indian stock markets.
Now let me show you one last table:
Markets follow only one thing, i.e. growth of an economy. As Indian economy is pegged to reach $5 trillion-mark over the next 5-6 years, one can only imagine the possibilities markets would offer to create wealth when the economy expands. Note that, I am saying when and not if.
To elucidate: One would always find reasons not to invest, but the truth is you can’t stop Mr. Markets. We tend to agree more on any bearish or negative argument, rather than looking at the green shoots in the economy. This is an accumulation phase for investors; the caveat here is to do it systematically.
Before I wrap up, three things I keep on telling them in investors is:
- Markets are dynamic (obviously considering the macro and microeconomic factors that influence them). Tell me now how you would predict all of them and time the entry and exit correctly? But unfortunately, many investors spend a lot of time predicting the future course of movement, which of course is a waste of time.
- Asset allocation, and not past performance (which many think) helps in wealth creation. It is a proven fact that 90% of returns can be attributed to optimal asset allocation and following a goal-based investment approach. Also, investors should understand that if invested right, equities outperform all other instruments.
- Most of the time, investors think they know everything, obviously, thanks to the information bombardment on digital platforms. However, having a financial advisor help you to stay on the right path without emotional bias.
“One can create money by investing in bull market, but one can create fortune by investing in bear market.”