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Sometime back when I was driving to work, I saw a car overtake me and speeding much beyond the prescribed limit. It seems the vehicle occupant was late for an appointment. Of course, as expected, he got stuck in traffic after some time and I pretty much caught up with him. I could not help but draw a comparison with investments. When someone starts late from home to go for an appointment, there is a tendency to drive fast. Similarly, when a person starts investing late, there is much more pressure to generate higher returns and take unnecessary risks. Like traffic, potholes and bumps on the road, volatility is a reality of markets. At times, it is unpredictable, uncertain and no matter how much you wish it will not go away. Volatility and traffic will only bother you if you are getting late for your goals and appointment respectively.
The Indian equity market has been quite volatile in the last one year. Though the Nifty 50 Index has gained 3%, the Midcap and Smallcap indices have fallen by 14% and 27% respectively since the beginning of the year. Even few Liquid funds took uncharacteristic hit this year due to IL&FS default. The S&P500 index has fallen close to 8% since January this year. The FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks which have been much in vogue are experiencing a downtrend. See below
You must be wondering, what should an investor do in such a case? I would rather ask the question "What should a PRUDENT INVESTOR do in such a case?" In our latest miK'newsletter, we gave 10 tips for being a prudent investor. I am reiterating these below.
YOU ARE A PRUDENT INVESTOR IF:
I hope you had a good 2018 and are finishing it with rejuvenating holidays. Mitraz team and I wish you and your family a very Happy New Year 2019. May you be blessed with peace and joy always!
The writer is the Managing Director of Mitraz Financial Services Pvt. Ltd and can be contacted at email@example.com