Stock market always look ahead and the long-term smart investors are the ones who will put money to work at this juncture. We want our investors to play smart by making lumpsum investments into equity funds with 3-5 years view and be part of the smart money movers.
The reasons for the fall have been three folds:
- Corona virus impact and the effect on the economies are uncertain
- Corona virus medicine/vaccine is not known to anyone
- Economic slowdown around the world expected to reduce Crude oil demand. Crude oil, demand & supply issues are not known and the impact it has on various economies
With the headlines screaming in your face about the gravity of the current situation, we strongly believe that you need to look beyond the headlines.
Invest with discipline, keep in long term perspective, remember your investment horizon and remain calm in times of distress are the key to long-term investing success.
We are confident that all our funds are well poised to generate good risk adjusted returns in the long run.
ITI Mutual Fund view, in the next 3-5 years:
- Equities stack up as the best asset class to invest and generate long term returns.
- Small cap segment will generate maximum returns followed by mid-caps and large caps.
- Small cap segment returns will beat large cap returns by a wide margin on a 1 year, 3 year and 5-year basis.
- An outstanding opportunity of this decade: When fundamentals are strong and the market valuations are at lowest point in two decades this becomes a very good investment opportunity.
- We can prepare ourselves in this situation for a better tomorrow. Nobody knows the bottom of the corona virus impact or bottom of the markets.
Last 3 decades of investing has taught me four important things which has been proven right time and again:
Respect valuation: When market valuation is very attractive, you have to bet saying that the current economic/ market situation will normalise. All equity market indices are trading at rock bottom valuations even when compared to global financial crisis periods.
Believe market fundamentals: India has the best demography and is the fastest growing economy in the world. Fundamentals don’t change overnight.
Watch market sentiments: You need to bet against the market sentiments.
Look for triggers: Look for upside/downside triggers depending on the market valuations.
Markets bottom out in midst of the scare and market peaks in midst of optimism. At the thick of the problems generally markets bottom out. So, cutting all noise and focusing on long term investing makes a lot of sense.
Investing into bust and selling into booms is very important to make big returns. This is the learning from all great investors like Warren Buffett, Seth Klarman, Charlie Munger, Benjamin Graham etc.
Few mistakes that investors should avoid:
- Don’t panic at the wrong time and redeem your investments.
- Don’t mix Risk and Volatility
- Don’t bet on the same sectors which have done very well for a long period pre-crisis.
- Don’t make decisions based on hearsay, rumours and baseless assumptions.
This is the time to be rational, invest maximum you can according to your risk appetite, ride through the volatile period and make money, so we all can together laugh at volatility next time when it comes. In few years you would be very happy with your decisions.
Note: This article is a marketing initiative of ITI Mutual Fund.
The author, George Heber Joseph is the CEO & CIO of ITI Mutual Fund
