The Faithful investor wins again

 The Faithful Investor Wins Again!

From "All fall down... to All gallop away"!

Humpty Dumpty Sat on a wall; Humpty Dumpty had a great fall;

And when all thought that this could not be put together again; it galloped away!!

The popular nursery rhyme and the financial markets seem to have a lot in common. On one side, the memory of the market bloodbath is fresh when investors lost lakhs of crores helplessly in what we call the 'March Madness', where the financial markets fell by more than 30% pushing the indices to the lowest in last three years.  The panic and uncertainty was everywhere which didn't spare even the investor of fixed instruments.

In less than 8 months the indices climbed back and recorded a fresh all time high on 11 Nov 20 and yes what a come-back indeed!

Between 'Then' and 'Now', the investors passed through mixed feelings ranging from total despair; naturally due to the extent of notional losses that many faced, to the the current day of elation on seeing their investments back at previous level and much more.  For many who jumped off the market wagon thinking that this was 'sinking ship', there is regret too!

A popular question then was "when will the markets bounce back?" with a niggling thought in many minds that once it does, we shall exit!

As an investor, a more pertinent question should have been "what should be my strategy to ride this market volatility?"

The financial markets always reward the disciplined and patient and this old adage proves true time and again. Those who had the maturity to remain invested in the right instrument and those who could invest during this phase a few months back, can see the unprecedented rewards on their investments in just a span of few months.

For those who invested with a strategy; remained disciplined and stuck to an asset allocation were rewarded with a goose that laid golden eggs, while the others who panic exited...well they just killed the golden goose!

There are always lessons to be learnt from any experience. So, what is it that some did different than the ones who killed their golden goose!

For starters, they all had a strategy that took care of asset allocation, diversification and points of entry and exit from the markets.  To them the market volatility was a roller coaster ride to be enjoyed if adequate safety precautions were in place. You don't after all jump from a roller coaster ride midway and if you do then you do hurt real bad!

Secondly they continued to invest steadily and rather used this opportunity to refine their investment bouquet; adding on the blue blooded and letting go of the laggards.

Last and not the least, they had access to quality advice that helped them take informed decisions. A strategy that works, an investment selection that is suitable, a performance check that is continuous and an allocation that is dynamic; Investment management is more than just picking up the best investment.

What goes down, comes up and vice versa.  How you manage to ride these waves is what makes a successful investor or a bad one.

Anupama Bhargava 

Financial Strategist