MARKET SINKING - Feeling Happy???

MARKET SINKING - How do you feel

I might sound like a fool, if ask this question to an equity investor. No, but I really mean it, if  you are an investor, not the trader and recent market fall panic you, then you need to seriously relook at your portfolio or time has come to change your financial planner.

Proper financial planning will help you to avoid such tensions and enjoy life.Let's see how it insulates you from market fall.

Normally there are 2 stages in any investments, first is Accumulation and the other is Withdrawal.

Accumulation Stage : This stage means that you are accumulating certain predetermined funds for some  particular goals or dreams which might be 8,10 or 25 years away. As the goals are too far you have taken an exposure in equity market to earn inflation adjusted returns.

During accumulation stage you are not putting all your funds on day one but contributing amount at regular intervals.

So if I had invested X amount at a higher market level then the fall in market is giving me opportunity to buy the same at discount. Hence, market fall is a good news for me rather then to be tensed.

Withdrawal Stage : Financial Planning suggests not to have any investments in Equity market when you are closer to your goals. So, if market falls during this period it shouldn't bother you as your exposure to Equity market must be nil.

Historically, it has been proved that Indian equity market has given average 15% annualised return over a longer period of time and in short period it has given return ranging from -13% to +101% (considering Financial Year wise) and for certain other period might be in the range of -50% to +100%.

This includes periods of :

1) GDP Growth from 3% to 8.5% - How it makes a difference in long run if some of the rating agency downgrades GDP forecasts by  50 or 80 bps.

2) Natural Calamity : Drought, Tsunami,Gujarat Earthquake ,Mumbai Floods.

3) Tragedy : Bhopal Gas Tragedy, Violence in Valley, Ayodhya Riots, WTC Bombing, Indian Parliament attack, Mumbai Terrorist attack.

4) Scams : Harshad Mehta, Ketan Parekh

5) Tech Bubble, Sub Prime Crisis and now U.S Downgrading

6) 2 Prime Minister Assassinated

I Quote Warren Buffett " Time in the Market is more important than timing the market".

Unquote, Inspite, of having all the bad phases which we can expect in an economy we have grown consistently.

Instead of getting worried about the market movement we should stick to the basics of Financial Planning to have the optimal benefit.