Volatile Markets & Investments

Many of you have questions like when will the market conditions revive, has the market reached or is it expected to reach the bottom, should we continue our investments and so on.

I am going to answer these with the example of Mr. Shah who started an SIP of Rs. 10,000 in Reliance Growth Fund in May, 2000. We will see his journey and the impact of his decisions on his portfolio today.

Out of the 20 years I have picked up the periods where the market was falling and Mr. Shah could have got nervous about continuing to invest as planned.

Luckily, come what may, Mr. Shah never stopped his investment and now is holding a corpus of 1.92 Crore from this fund alone with a CAGR of 16.64%. We will go one step ahead and calculate how much of this amount was made in Neutral, Bullish and Bearish Markets.

Key Observations:

1)   The 5.1L invested in falling Markets made 73.8L in the valuation i.e. 21% of the investment makes up 38.5% of the holding.

2)   There will always be a crisis and the markets will always react to them but a down phase is always followed by equivalent up phase.

3)   This doesn’t mean that as soon as market starts falling, we go all in. We should maintain our regular planned investments for long term and if possible, increase a little during down falls but strictly to extent of manageable Risk Appetite.